Question

In: Finance

Growth Rate 4% Required Return 11% Year 1 Rent 20,000 Years Stable Rent 3 Years Growing...

Growth Rate 4%

Required Return 11%

Year 1 Rent 20,000

Years Stable Rent 3

Years Growing Rent 7

Year Sold 10

Sale Price in 10 Years 325,000

Ask Price Today 200,000cash flows

Present Value
PV First 3 Years
PV Next 7 Years
PV Sale price
Total PV

Determine cash flows period 0-10

Solutions

Expert Solution

Year Ask price Rent Sale price Net CF
0 -200000 -200000.00
1 20000 20000.00
2 20000 20000.00
3 20000 20000.00
4 20800 20800.00
5 21632 21632.00
6 22497.28 22497.28
7 23397.17 23397.17
8 24333.06 24333.06
9 25306.38 25306.38
10 26318.64 325000 351318.64
PV First 3 Years $48,874.29
PV Next 7 Years 79557.22
PV Sale price $114,459.96
Total PV $242,891.47

Workings


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