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s. 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 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 c property is undervalued.. net operating income -1,953,309 $107,432 $107,432 $107,432 $107,432 discount rate 5.50%

s. 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 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 c property is undervalued.. net operating income -1,953,309 $107,432 $107,432 $107,432 $107,432 discount rate 5.50%

Essentials Of Investments
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
Section: Chapter Questions
Problem 1PS
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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 0 1 2 3 4 5 6 7 8 9 10 11 12 True False net operating income -1,953,309 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $2,646,734 discount rate 5.50%
Transcribed Image Text: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 0 1 2 3 4 5 6 7 8 9 10 11 12 True False net operating income -1,953,309 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $107,432 $2,646,734 discount rate 5.50%
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