A freehold reversion produces $30,000 p.a. for 5 years and thereafter the full rental value. The current market rental value is $45,000 p.a. Freeholds in similar properties let at full rental value sell at notional yields of 7%. Investors regard this type of investment as more attractive than properties let at full rental value. Value the freehold reversion using a 7% yield for the term and 5% yield for the reversion?

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The value of the freehold reversion can be calculated using the following steps Calculate the presen... View the full answer