DCF Valuation Consider a property with expected future net cash flows of $25,000 per year for the next five years (starting one year from now) After that, the operating cash flow should step up 20 , to $30,000, for the following five years If you expect to sell the property 10 years from now for a price 10 times the net cash flow at that time, what is the value of the property if the required return is 12 In the previous question, suppose the seller of the building wants $260,000 What is your NPV if you buy the property at $260,000 Should you do the deal Why or why not What is the IRR if you pay $260,000 How does this compare to the required return of 12 What is the IRR if you could get the seller to accept $248,075 for the property What is the NPV at that price

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Question: DCF - Valuation Consider a property with expected future net cash flows of $25,000 per year for the next five years (starting one year from

DCF - Valuation

Consider a property with expected future net cash flows of $25,000 per year for the next five years (starting one year from now). After that, the operating cash flow should step up 20%, to $30,000, for the following five years. If you expect to sell the property 10 years from now for a price 10 times the net cash flow at that time, what is the value of the property if the required return is 12%?
- In the previous question, suppose the seller of the building wants $260,000. What is your NPV if you buy the property at $260,000?
- Should you do the deal? Why or why not?
- What is the IRR if you pay $260,000? How does this compare to the required return of 12%?
- What is the IRR if you could get the seller to accept $248,075 for the property? What is the NPV at that price?

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