Homework Answers
We have to calculate the present worth of the property.
Here, Initial Investment(I)= $8000 , Interest rate(i)=9%
Therefore, cash flows each year
Year. Cash Flow($)
0. -8000
1. 1300
2. 1250
3. 1200
4. 1150
5. 1100
6. 1050
7. 1000
8. 950
9. 900
10. 850
11. 800
12. 750
13. 700
14. 650
15. 600
PW of the property = -8000+1300/(1+0.09)+1250/(1+0.09)^2 + 1200/(1+0.09)^3+...........+600/(1+0.09)^15
PW= $288.55 or $289
or
The present value of the rental income is = PW+8000 = 289+8000= $8289
Thank you
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