Question

Stu can purchase a house today for $110,000, including the cost of some minor repairs. He expects to be able to resell it in one year for $129,000 after cleaning up the property. At a discount rate of 5.5 percent, what is the expected net present value of this purchase opportunity? You must use your financial calculator to solve for NPV or no credit will be given. Your answer should reflect 4 decimal places to the right of the decimal point. You must show your work and the order of keys used (i.e. [CPT], [NPV], [I/Y], etc.) or no credit will be given.

Answer 1

CF₀ = -110,000

CF₁ = 129,000

I/Y = 0.055

[CPT][NPV]

NPV = $12,274.88

So,

Net Present Value = $12,274.88