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Find expected changes in property value

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An investment company is considering the purchase of an office property. After a careful review of the market and the leases that are in place, the company believes that next year's cash flow will be $100,000. It also believes that the cash flow will rise in the amount of $5,000 each year for 10 years and then grow at 2% per year indefinitely. The investment company believes that it should earn an IRR (required rate of return) of 12%.

Assuming that the value of property is expected to appreciate at an annual rate of 3% during the next 10 years, what would be the value for this property today if the resale value is estimated from the expected changes in property value?

Reference no: EM132685924

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