Real Estate Math
An investor wants a 7% return on investment from a Hawaii property. If the property will sell for $1,500,000 in 5 years and generates $75,000 annually, what is the approximate present value? (Use simple calculation: PV = FV / (1+r)^n for terminal value only, then add income.)
AA. $1,069,118
BB. $1,375,000✓ Correct
CC. $1,140,000
DD. $1,200,000
Explanation
PV of terminal value = $1,500,000 / (1.07)^5 = $1,500,000 / 1.
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