The annual income from an apartment complex is $20220. The annual expense is estimated to be $3435. The apartment complex could be sold for $123686 at the end of 10 years. If your MARR is 10%, how much should you pay for the apartment complex if you were to buy it now?
ANSWER:
Annual income = $20,220
Annual expense = $3,435
Annual benefit = Annual income - Annual expense = $20,220 - $3,435 = $16,785
Salvage value = $123,686
n = 10 years
i = 10%
Present value = Annual benefit(p/a,i,n) + salvage value(p/f,i,n)
Present value = 16,785(p/a,10%,10) + 123,686(p/f,10%,10)
Present value = 16,785 * 6.145 + 123,686 * 0.3855
Present value = 103,143.83 + 47,680.95
Present value = 150,824.78
So, right now he should pay $150,824.78 for the house.
The annual income from an apartment complex is $20220. The annual expense is estimated to be $3435.
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