Business, 11.10.2020 23:01 Allyf23

You can buy a property today for $4 million and sell it in 6 years for $5 million. You will not earn any rental income on the property. Answer the following questions. a.) If the interest rate is 5%, what is the present value of the sales price? (4 pts) b.) Is this a good investment for you? Explain your answer (4 pts) c.) If the interest rate is 5%, what is the present value of the sales price if you also earned $200,000 in rental income each year? (4 pts)

Answers: 3

Show answers

Answers

Answer from: nockturnal1993

a. Present value = $3,731,076.98

It is not a good investment because the present value of the sales price is less than the purchase price of the property. This means that purchasing the property would be unprofitable.

c. Present value = $4,746,215.40

Explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

a. Cash flow each year from year 1 to 5 = 0

Cash flow in year 6 = $5,000,000

I = 5%

Present value = $3,731,076.98

It is not a good investment because the present value of the sales price is less than the purchase price of the property. This means that purchasing the property would be unprofitable.

c. Cash flow each year from year 1 to 5 = $200,000

cash flow in year 6 = $200,000 + $5,000,000 = $5,200,000

I = 5%

Present value = $4,746,215.40

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

Answer from: Quest

Presidential salary

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

Another question on Business

Business, 21.06.2019 22:40

The vaska company buys a patent on january 1, year one, and agrees to pay $100,000 per year for the next five years. the first payment is made immediately, and the payments are made on each january 1 thereafter. if a reasonable annual interest rate is 8 percent, what is the recorded value of the patent? 1. $378,4252. $431,2133. $468,9504. $500,000

Answers: 3

Answer

Business, 22.06.2019 04:00

Don’t give me to many notifications because it will cause you to lose alot of points

Answers: 1

Answer

Business, 22.06.2019 13:40

Jacob is a member of wcc (an llc taxed as a partnership). jacob was allocated $155,000 of business income from wcc for the year. jacob’s marginal income tax rate is 37 percent. the business allocation is subject to 2.9 percent of self-employment tax and 0.9 percent additional medicare tax. (round your intermediate calculations to the nearest whole dollar a) what is the amount of tax jacob will owe on the income allocation if the income is not qualified business income? b) what is the amount of tax jacob will owe on the income allocation if the income is qualified business income (qbi) and jacob qualifies for the full qbi duduction?

Answers: 2

Answer

Business, 22.06.2019 16:30

Why are there so many types of diversion programs for juveniles

Answers: 2

Answer

You know the right answer?

You can buy a property today for $4 million and sell it in 6 years for $5 million. You will not earn...

Questions