Question
In: Accounting
Suppose that annual income from a rental property is expected to start at $1800 per year...
Suppose that annual income from a rental property is expected to start at $1800 per year and decrease at a uniform amount of $73 each year after the first year for the 13 year expected life of the property. The investment cost is $8800 and i is %11 per year. What is the present equivalent of the rental income? Assume that the investment occurs at time zero (now) and that the annual income is first received at the end of first year. PLEASE DEF?NE NET ANSWER W?TH BOL
Solutions
Expert Solution
| Calculation of present equivalent of rental income: | |||
| Time | PVF @11% | Amount | PV |
| - | 1.00 | -8,800.00 | -8,800.00 |
| 1.00 | 0.9009 | 1,800.00 | 1,621.62 |
| 2.00 | 0.8116 | 1,727.00 | 1,401.67 |
| 3.00 | 0.7312 | 1,654.00 | 1,209.39 |
| 4.00 | 0.6587 | 1,581.00 | 1,041.45 |
| 5.00 | 0.5935 | 1,508.00 | 894.92 |
| 6.00 | 0.5346 | 1,435.00 | 767.21 |
| 7.00 | 0.4817 | 1,362.00 | 656.02 |
| 8.00 | 0.4339 | 1,289.00 | 559.33 |
| 9.00 | 0.3909 | 1,216.00 | 475.36 |
| 10.00 | 0.3522 | 1,143.00 | 402.55 |
| 11.00 | 0.3173 | 1,070.00 | 339.49 |
| 12.00 | 0.2858 | 997.00 | 284.98 |
| 13.00 | 0.2575 | 924.00 | 237.94 |
| 14.00 | 0.2320 | 851.00 | 197.43 |
| 1,289.38 | |||
| Present equivalent of rental income is $1289.38 | |||
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