The Table Below Shows the Projected Net Cash Flows (Including

question 1

Multiple Choice

The table below shows the projected net cash flows (including reversion) for Property A and Property B. If both properties sell at fair market value for a cap rate (initial and terminal net cash yields) of 7%, then which statement below correctly describes the relative investment risk in the two properties? $$\begin{array}{l}\text { Arnuel net cast flow prajectians for twaprapeties (\$1,000,000) }\\\begin{array} { | l | r | r | r | r | r | r | r | r | r | r | } \hline \text { Year: } & 1 & \mathbf { 2 } & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \\\hline \mathbf { A } & \$ 1.0000 & \$ 1.0000 & \$ 1.0000 & \$ 1.0000 & \$ 1.0000 & \$ 1.0000 & \$ 1.0000 & \$ 1.0000 & \$ 1.0000 & \$ 15.2857 \\\hline \mathbf { B } & \$ 1.0000 & \$ 1.0200 & \$ 1.0404 & \$ 1.0612 & \$ 1.0824 & \$ 1.1041 & \$ 1.1262 & \$ 1.1487 & \$ 1.1717 & \$ 18.6093 \\\hline\end{array}\end{array}$$

• A) Property A is more risky.
• B) Property B is more risky. Because it's got a higher expected total return E[r] at equilibrium in the market (FMV).
• C) They both are equally risky.
• D) Insufficient information to determine the answer.

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Definitions:

FMRI Scans

Functional Magnetic Resonance Imaging, a neuroimaging procedure that measures and maps brain activity by detecting changes in blood flow.

Neuromarketing Method

An approach in marketing research that uses neuroscience technologies to study the brain's responses to marketing stimuli, aiming to understand consumer behavior.

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The process of gathering, analyzing, and using information, legally and ethically, from the business environment including competitors for strategic decision making.

Data Mining

A process that involves the computerized search for meaningful trends in a large amount of data.