Question

Real Estate Finance:

A proposed investment will return a seven-year income stream with first year income of $1,750,000 growing at 6% per year.

There is no terminal value.

What is the IRR on the investment if that income stream is purchased for $6,500,000? (Assume annual compounding.)

A.	14.50%
B.	19.00%
C.	23.88%
D.	12.50%

Also, based on the information provided above what is the Investment multiple for that same investment?
A.	1.26
B.	2.26
C.	0.67
D.	1.67

Again using the information from above what is the Investment multiple if the purchase price is based on a 12.5% required rate of return? Again, assume annual discounting.
A.	(0.13)
B.	0.88
C.	0.60
D.	1.60

Answer 1