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Business, 21.05.2021 04:50 lucywood2024

You have been asked to estimate the market value of an income-producing property. The table below provides 5 years of projected cash flows for the property. Use the discounted cash flow approach to income valuation to calculate the market value. Assume that you sell the property at the end of year 5 and that the net proceeds from the sale are $5.0 million. Also assume that the discount rate is 7.5%. Year 1 Year 2 Year 3 Year 4 Year 5
PGI $750,000 $780,000 $811,200 $843648 $877394
EGI $627500 $663000 $717,101 $689,520 $745785
NOI $318715 $331,500 $334,760 $358,550 $372,892

a. $4.18 million
b. $6.11 million
c. $4.12 million
d. $4.40 million

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