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Dan Schmidt plans to invest in a rental property worth $240,000. He plans to hold the...

Dan Schmidt plans to invest in a rental property worth $240,000. He plans to hold the property for 4 years and expects to sell it for $280,000 at the end of the fourth year. He estimates that the average monthly net income from renting the property will be $2,250. His target return is 8%. Calculate the net present value of the investment.

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Answer #1

Net present value of the investment = Present value of monthly rent + Present value of Sale amount - Investment amont

= 2250*CPVF 8/12%,4*12 + 280000*PVF 8%, 4 - 240000

= 2250*40.962 + 280000*0.735 - 240000

= $57,965

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