An apartment building can be well represented as producing net rent of $10/SF annually in arrears, with expected annual growth over the long run of negative 1% per year (that is, a decline of 1% per year). Use the constant-growth perpetuity formula to estimate the apartment building’s value (per SF) if the required annual expected total return from the investment is 10%.

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To estimate the value of the apartment building per square foot SF using the c... View the full answer