Explain how much should it be willing to pay today

Reference no: EM1329916

Small office complex

I am considering purchasing a small office complex that will generate a gross in rents of $600,000 per year. Because of lont-term leases, rental income is not expected to change over the next 20 years. Next year, expenses will be $200,000. Thereafter, however, expenses are expected to grow with inflation at 4% per year. Investors usually demand a 10% (nominal) rate of return on such investments. In 20 years, I could sell the apartment complex for $2 million (which includes the effects of 20 years' inflation). Ignoring taxes, how much should I be willing to pay today for the office complex?

Reference no: EM1329916

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