A real estate investor is considering the purchase of an apartment building that is expected to provide the following cash flows at the end of each of the following years:
Year 1: $12,100
Year 2: $12,100
Year 3: $12,100
Year 4: $12,100 + $350,000
Given the investor has a discount rate equal to 10 percent, what is the present value of the above cash flows

A real estate investor is considering the purchase of an apartment building that currently provides income of $30,000 and is expected to grow in income by 3% for the next 4 years. You would receive income from today, year 0, through year 4. At the end of year 4, they expect to sell the property for $800,000. The investor has a discount rate of 6%. How much should an investor be willing to pay for this property?

Answer rating: 100% (QA)

To find the present value of cash flows you can use the formula for the present value of a series of ... View the full answer