A property is expected to have net operating income during the first year of $50,000, which is projected to increase at a rate of 4% p.a. over a five-year holding period. The property value is also projected to increase at a rate of 4% p.a. The valuer believes that a 14% discount rate is appropriate. What is the estimated value of the property? Assume rent is paid annually in arrears. a. $500,000. b. $184,054. C. $357,143. d. $292,150.

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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A property is expected to have net operating income during the first year of $50,000, which is projected to
increase at a rate of 4% p.a. over a five-year holding period. The property value is also projected to increase
at a rate of 4% p.a. The valuer believes that a 14% discount rate is appropriate. What is the estimated value of
the property? Assume rent is paid annually in arrears.
$500,000.
b. $184,054.
a.
C. $357,143.
d. $292,150.
Transcribed Image Text:A property is expected to have net operating income during the first year of $50,000, which is projected to increase at a rate of 4% p.a. over a five-year holding period. The property value is also projected to increase at a rate of 4% p.a. The valuer believes that a 14% discount rate is appropriate. What is the estimated value of the property? Assume rent is paid annually in arrears. $500,000. b. $184,054. a. C. $357,143. d. $292,150.
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