Athena Investment Company is considering the purchase of an office property. After a careful review of the
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Question:
Athena Investment Company is considering the purchase of an office property. After a careful review of the market and the leases that are in place, Athena believes that next years cash flow will be $ It also believes that the cash flow will rise in the amount of $ each year for the foreseeable future. It plans to own the property for at least years. Based on a review of sales of properties that are now years older than the subject property, Athena has determined that cap rates are in a range of Athena believes that it should earn an IRR required return of at least percent.
Required:
a What is the estimated value of this office property assume a terminal cap rate
b What is the current, or goingin cap rate for this property?
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