Estimate the terminal value of the properties

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

Problem 1: Estimate the terminal value of the properties, based on the current market value and the expected appreciation rate in property values?

Problem 2: At the end of the 10th year, what would be the ratio of value to income for the property?

Reference no: EM132946368

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