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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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    Perpetual Income per year=C=$50000

    Property's market risk is same as ...

    Solution Summary

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