Growing Annuity
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You are considering the purchase of an office complex that will generate a gross of $1000000 per year. Because of long term leases, rental income is not expected to change over the next 20 years. Next year expenses will be $200000.
Their after, however expenses are expected to grow with inflation at 4% per year. Investors usually demand 10% (nominal) rate of return on such investment. In 20 years you could sell the complex for $2 million ignore taxes.
How much should you be willing to pay for the office complex?
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You are considering the purchase of an office complex that will generate a gross of $1000000 per year. Because of long term leases, rental income is not expected to change over the next 20 years. Next year expenses will be $200000.
Their after, however expenses are expected to grow with inflation at 4% per year. Investors usually demand 10% (nominal) rate of return on such investment. In 20 years you could sell the complex for $2 million ignore taxes.
How much should you be ...
Purchase this Solution
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