You Are Trying to Apply a Multi-Year DCF Analysis to Evaluate

question 8

Multiple Choice

You are trying to apply a multi-year DCF analysis to evaluate an investment property with some long-term leases in it. You observe that other properties with similar lease structure and risk have been selling at cap rates around 8% (based on NOI with no capital reserve) . You believe these other properties typically face capital expenditures on the order of 2% of property value per year in the long run, and that given such expenditures their net cash flows and values would reasonably be expected to grow in the long run at about 1% per year. What discount rate should you apply to your subject property in your DCF valuation?

• A) 6%
• B) 7%= (8% - 2%) + 1% = (caprate - CI/V) + g = y + g .
• C) 8%
• D) 9%
• E) 10%

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Definitions:

Genetic Sex

Determined by the chromosomes an individual inherits (XX for females and XY for males), affecting the development of sexual and reproductive anatomy.

Gonads

The primary reproductive organs in animals, namely testes in males and ovaries in females, responsible for producing gametes and hormones.

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Features that distinguish the two sexes of a species apart from the reproductive organs, developing during puberty, such as body hair and voice changes.

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