Applying Present Value Calculations to Value a Building (Easy)

In the year 2008, a real estate analyst forecasts that a rental apartment building will generate $5.3 million each year in rents over the five years 2009–2013. Cash expenses are expected to be $4.2 million a year. At the end of five years, the building is expected to sell for $12 million. Real estate investors expect a 12 percent return on their investments. Apply present value discounting techniques to value the building.

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