Problem:
A commerical real estate property has been evaluated by an appraiser, who estimates the following Net Operating Income for property over the next 6 years. Initially, the property will have $90,000 Net Operating Income, and then will jump to $110,000, and then grow consistently at 5% thereafter.
Required:
Question 1: Assuming a cost of capital of 8%, what is the value of the property?
Question 2: What is the property's Internal Rate of Return (IRR)?
Note: Please provide step by step solution.