Athena investment company is considering the purchase of an office property. after a careful review of the market and the leases that are in place, athena believes that next year’s cash flow will be $100,000. it also believes that the cash flow will rise in the amount of $7,000 each year for the foreseeable future. it plans to own the property for at least 10 years. based on a review of sales of properties that are now 10 years older than the subject property, athena has determined that cap rates are in a range of .10. athena believes that it should earn an irr (required return) of at least 12 percent.
what is the estimated value of this office property (assume a .10 terminal cap rate)?