An investor has an opportunity to purchase an investment that will provide $11,000 at the end of one year, and $50,000 at the end of three years. The cash flow will increase at a rate of 5% per year afterwards. The investor has a negative amortizing five-year loan of $500,000 at a rate of 10% per year with annual payments and a balloon payment of $750,000. 

If the property is expected to be sold at the end of the third year with the reversion rate of 8% and the investor requires a 12% rate of return, what amount should he or she pay for the investment today?

Answer rating: 100% (QA)

To determine the amount the investor should pay for the investment today we need to calculate the pr... View the full answer