I discounted the next 12 years of net operating income of property X that is for sale and is currently being leased by Burger King .The lease term is 12 years. I used the cap rate of the property 5.5% as the discount rate. I ignored any rent increases. I assumed the property could be sold for 30% more than I paid. I have decided that I will buy the property if the NPV is over the asking price of $250,000. My analysis is correct. I can certainly confirm that the property is undervalued.. time net operating income discount rate 0 -1,953,309 5.50% 1 $107,432 2 $107,432 3 $107,432 4 $107,432 5 $107,432 6 $107,432 7 $107,432 8 $107,432 9 $107,432 10 $107,432 11 $107,432 12 $2,646,734 True False
I discounted the next 12 years of net operating income of property X that is for sale and is currently being leased by Burger King .The lease term is 12 years. I used the cap rate of the property 5.5% as the discount rate. I ignored any rent increases. I assumed the property could be sold for 30% more than I paid. I have decided that I will buy the property if the
time net operating income discount rate
0 -1,953,309 5.50%
1 $107,432
2 $107,432
3 $107,432
4 $107,432
5 $107,432
6 $107,432
7 $107,432
8 $107,432
9 $107,432
10 $107,432
11 $107,432
12 $2,646,734
True
False
Step by step
Solved in 3 steps with 2 images
