Reca Commercial Unit2 Study Guide Rated A+

Review how to calculate PV {Ans: The present value of an uneven cash flow is the price an investor should be prepared to pay for a real estate asset to receive their required rate of return. If the investor can acquire the investment for a price equal to the present value, the investor will earn their required rate of return, assuming the forecasts are accurate. If a higher price is paid, the investor earns less than their required rate of return. If a lower price is paid, the investor earns more than their required rate of return. In general, investors should proceed with the investment if the present value of all future cash flows at the investor's discount rate equals or exceeds the cost of acquiring the investment, assuming the projections are accurate. To calculate the present value of future uneven cash flows, we must know the reversionary value, the net expected future cash flow for each year the investment will be held, the discount rate, and the number of time periods over which the investment is held.}Under securities legislation, a REIT qualifies as an MFT for a particular taxation year if throughout the year it is resident in