Estimate the terminal value of the properties

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Bevan Real Estate Inc. is a real estate holding company with four properties. You estimate that the income from these properties, which is currently $50 million after taxes, will grow 8% a year for the next 10 years and 3% thereafter. The current market value of the properties is $500 million, and you expect this value to appreciate at 3% a year for the next 10 years.

a. Estimate the terminal value of the properties, based on the current market value and the expected appreciation rate in property values.

b. Assuming that your projections of income growth are right, what is the terminal value as a multiple of after-tax operating income in the tenth year

Reference no: EM132816258

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