If a Property Will Produce Net Cash Flow That Grows

question 24

Multiple Choice

If a property will produce net cash flow that grows at a rate of 1.5% per year in perpetuity, and the opportunity cost of capital is 12%, then what is the "cap rate" net cash flow / property value) for the property?

• A) 8%.
• B) 10%.
• C) 10.5%.
• D) 12%.

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Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen, essentially what is forfeited when a particular course of action is selected over others.

Attending College

The act of enrolling in and going to a collegiate institution for higher education, often pursued to gain skills, knowledge, and qualifications for future employment.

Annual College Expenses

The total cost of attending a college or university for one academic year, including tuition, fees, room, board, books, and other related expenses.

Minimum Price

The lowest possible selling price, set by agreement or regulation, below which a product cannot legally be sold.