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A rental property is providing 13% rate of return. Next year's rent is expected to be $1.0 million and is expected to grow at 3% per year forever.

A rental property is providing 13% rate of return. Next year's rent is expected to be $1.0 million and is expected to grow at 3% per year forever. What is the current value of the property?

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A rental property is providing 13% rate of return. Next... View the full answer

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 1/(0.13+0.03)=$6.25... View the full answer

1 comment
  • correction: 1/(0.13-0.03)=$10million
    • Nickson072
    • Jul 20, 2016 at 11:39am

Using DDM, value of property =... View the full answer

It's geometric gradient where g is growth, and i is rate of return, A1 is the first payment. When the time... View the full answer

Here is the answer... View the full answer

economics 1.docx

where g is growth, and i is rate of return, A1 is the first payment.
When the time of return is infinity/forever, this formula become
Pg = A1 [ 1 / (i-g)], if you want you can still use long...

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