Problem:
A property produces a first-year net operating income of $24,000. Because of the long economic life of the building, the income is considered as a perpetuity that will grow by 2.5% per year.
Required:
Question: Using a discount rate of 9.5%, estimate that property value.
A. $276,968
B. $252,632
C. $200,000
D. $342,857