Real estate investment is a type of alternative investments. An analyst has collected the following expected...

Real estate investment is a type of alternative investments. An analyst has collected the following expected cash flows about a project:

Year Cash Flows

1 $10,000

2 25,000

3 50,000

4 35,000

The initial cost is $85,000. The discount rate is 8.125 percent. What is the investment's present value?

a. $13,700

b. $18,200

c. $12,400

d. $16,118

e. None of above

Expert Solution

Ans e. None of above

NPV= $ 10793.90

Year	Project Cash Flows (i)	DF@ 8.125%	DF@ 8.125% (ii)	PV of Project ( (i) * (ii) )
0	-85000	1	1	(85,000.00)
1	10000	1/((1+8.125%)^1)	0.924855	9,248.55
2	25000	1/((1+8.125%)^2)	0.855358	21,383.94
3	50000	1/((1+8.125%)^3)	0.791082	39,554.11
4	35000	1/((1+8.125%)^4)	0.731637	25,607.29
		NPV	10,793.90

jeff jeffy answered 2 years ago

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