A real estate investment has the following expected cash flows: Year Cash Flows 1 $7,000 2...

A real estate investment has the following expected cash flows: Year Cash Flows 1 $7,000 2 17,000 3 22,000 4 22,000 The discount rate is 11 percent. What is the investment’s present value? Round it to two decimal places, i.e., 1234.45.

Expert Solution

The present value is computed as shown below:

= Future value / (1 + r)ⁿ

= $ 7,000 / 1.11 + $ 17,000 / 1.11² + $ 22,000 / 1.11³ + $ 22,000 / 1.11⁴

= $ 50,682.18 Approximately

jeff jeffy answered 2 years ago

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