Question

A client has requested advice on a potential investment opportunity involving an income-producing property. She would like you to determine the internal rate of return of the investment opportunity based on the following information: expected holding period: years; end of first year NOI estimate: $110,000; NOI estimates in subsequent years will grow by 6 % per year; price at which the property is expected to be sold at the end of year 5: $1,615,205.22; current market price of the property: $1,475,667.71.

Answer #1

T=0 | T=1 | T=2 | T=3 | T=4 | T=5 | |

Initial Cost | - 1,475,667.71 | |||||

NOI | 110,000.00 | 116,600.00 | 123,596.00 | 131,011.76 | 138,872.47 | |

Salvage Value | 1,615,205.22 | |||||

Total |
- 1,475,667.71 |
110,000.00 |
116,600.00 |
123,596.00 |
131,011.76 |
1,754,077.69 |

The cashflows in each of the years (with T=0 meaning now, and T=1 meaning the end of the 1st year and so on) are shown in the table above

IRR of all the above cashflows (and that of the investment
opportunity) is **9.87%**

Please do it manually
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