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.

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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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