You are considering the purchase of a small retail shopping complex that will generate net cash flows
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Question:
You are considering the purchase of a small retail shopping complex that will generate net cash flows each of the next 15 years, starting at $500,000 in Year 1. You normally demand a 8% rate of return on such investments. Future cash flows after year 1 are expected to grow with inflation at 2% per year. How much would you be willing to pay for the complex today if it will have to be torn down in 15 years, and the land could be sold for a net amount of $4 million in year 15?
Related Book For
Fundamentals of Investment Management
ISBN: 978-0078034626
10th edition
Authors: Geoffrey Hirt, Stanley Block
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