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Courtney Baxter has presented Joshua with yet another opportunity: It is related to a commercial property investment. Based upon a market analysis involving the review of supply and demand, rents, and estimated operating expenses, annual net operating income (NOI) is estimated as follows:

Year NOI
1 $1,000,000
2 $1,000,000
3 $1,000,000
4 $1,100,000
5 $1,200,000
6 $1,250,000
7 $1,287,500
8 $1,326,125


There is the expectation that Citadel, LLC should be able to earn a 10% return on an investment like this venture. And, starting from year 6 to year 7 and every year thereafter, the NOI is expected to grow at 3% per year indefinitely. Assuming this investment is expected to produce NOI in years 1-8 and be owned for seven years and then sold, what would be the value for this property today?

 

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