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Calculating fair value of a real estate

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You are considering the purchase of real estate that will provide perpetual income that should average $50,000 per year.

How much will you pay for the property if you believe its market risk is the same as the market portfolio's?

(The T-bill rate is 5%, and the expected market return is 12.5%).

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Solution describes the steps to calculate fair value of a real estate.

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Perpetual Income per year=C=$50000

Property's market risk is same as ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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