1a.Suppose a real estate investment offers cash flows of $100,000 per year for five years. At the end of five years, the building is expected to be worth $1,100,000. What is the most you should pay for the investment if your opportunity cost of capital is 10%?
1b.Suppose you think the annual cash flows noted above will grow at an annual rate of 5% and the value of the property grows by 4%. What is the most you should pay for the investment, assuming your opportunity cost of capital is 12%