An investment company is considering the purchase of an office property. After a careful review...
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Accounting
An investment company is considering the purchase of an office property. After a careful review of the market and the leases that are in place, the company believes that next years cash flow will be $100,000. It also believes that the cash flow will rise in the amount of $5,000 each year for 10 years and then grow at 2% per year indefinitely. The investment company believes that it should earn an IRR (required rate of return) of 12%.
Assume that the value of property today is $1,300,000 and 1,500,000 for the next year, what is the current, or going-in, cap rate for this property?
Group of answer choices
7.00%
6.67%
7.69%
8.08%
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