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    Property Valuation by Income Approach

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    A piece of rental property will generate $10,000, a year for five years, $12,000 for the next five years, and then be sold at the end of the tenth year for $100,000. If you can earn 10 percent on your funds, what is the maximum you should pay for the property?

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    Solution Summary

    Given the expected cash flows from a piece of rental property and required return on investment, this solution illustrates how to value the property.