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You are thinking about buying a rental property. Because of the difficulty getting a loan, you...

You are thinking about buying a rental property. Because of the difficulty getting a loan, you are going to pay $350,000 in cash for the house today. You think you can rent out the property for the next 10 years, receiving $1,400 in cash each month after your expenses and taxes, starting a month from today. At the end of ten years, you believe you will be able to sell the property for $425,000. If your discount rate is 7.2% annually with monthly compounding, what is the NPV of the rental property?

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solution: Monthly rent X PVIFA(0.6%,120)** PV of rent 0.60% **factor working : Interest rate per month=7.2%/12 Period in mont

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