21. An investor is considering the purchase of an office complex. Next year's NOI and cash flow is expected to be $1,000,000 and economic forecast of market supply and demand and vacancy levels will continue to be in balance. As a result NOI should increase by 4 percent each year and the investor believes she should earn 12% total return on the investment. What is the NPV of this investment if the purchase price is $13M? a. -777,778 b. -500,000 c. +500,000 d. 8,333,333 e. Some other amount

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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21. An investor is considering the purchase of an office complex. Next year's NOI and cash
flow is expected to be $1,000,000 and economic forecast of market supply and demand
and vacancy levels will continue to be in balance. As a result NOI should increase by 4
percent each year and the investor believes she should earn 12% total return on the
investment. What is the NPV of this investment if the purchase price is $13M?
a. -777,778
b. -500,000
c. +500,000
d. 8,333,333
e. Some other amount
Transcribed Image Text:21. An investor is considering the purchase of an office complex. Next year's NOI and cash flow is expected to be $1,000,000 and economic forecast of market supply and demand and vacancy levels will continue to be in balance. As a result NOI should increase by 4 percent each year and the investor believes she should earn 12% total return on the investment. What is the NPV of this investment if the purchase price is $13M? a. -777,778 b. -500,000 c. +500,000 d. 8,333,333 e. Some other amount
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