Homework Helper

Not Rated (0)

$17/per page/

About Homework Helper

Levels Tought:
Elementary,Middle School,High School,College,University,PHD

Expertise:
Accounting,Applied Sciences See all
Accounting,Applied Sciences,Art & Design,Chemistry,Economics,Essay writing Hide all
Teaching Since: Apr 2017
Last Sign in: 418 Weeks Ago, 4 Days Ago
Questions Answered: 3232
Tutorials Posted: 3232

Education

  • MBA,MCS,M.phil
    Devry University
    Jan-2008 - Jan-2011

  • MBA,MCS,M.Phil
    Devry University
    Feb-2000 - Jan-2004

Experience

  • Regional Manager
    Abercrombie & Fitch.
    Mar-2005 - Nov-2010

  • Regional Manager
    Abercrombie & Fitch.
    Jan-2005 - Jan-2008

Category > Business & Finance Posted 05 Jun 2017 My Price 7.00

Your real estate adviser has come back with some revised

Your real estate adviser has come back with some revised forecasts. He suggests that you rent out the building for two years at $20,000 a year, and predicts that at the end of that time you will be able to sell the building for $400,000. Thus there are now two future cash flows—a cash flow of C1 = $20,000 at the end of one year and a further cash flow of C2 = (20,000 + 400,000) = $420,000 at the end of the second year. The present value of your property development is equal to the present value of C1 plus the present value of C2. Figure 2.4 shows that the value of the first year’s cash flow is C1/(1 + r) = 20,000/1.12 = $17,900 and the value of the second year’s flow is C2/ (1 + r)2 = 420,000/1.122 = $334,800. Therefore our rule for adding present values tells us that the total present value of your investment is

PV = C1/1+r + C2/(1+r)2 = 20,000/1.12 + 420,000/1.122 =17,900 +334,800 =$352,700

Sorry, but your office building is now worth less than it costs. NPV is negative:

NPV =$352,700 -$370,000 =-$17,300

Perhaps you should revert to the original plan of selling in year 1.

Answers

Homework Helper
Not Rated (0)
Status NEW Posted 05 Jun 2017 09:06 AM My Price 7.00

Hel-----------lo -----------Sir-----------/Ma-----------dam----------- T-----------han-----------k Y-----------ou -----------for----------- us-----------ing----------- ou-----------r w-----------ebs-----------ite----------- an-----------d a-----------cqu-----------isi-----------tio-----------n o-----------f m-----------y p-----------ost-----------ed -----------sol-----------uti-----------on.----------- Pl-----------eas-----------e p-----------ing----------- me----------- on----------- ch-----------at -----------I a-----------m o-----------nli-----------ne -----------or -----------inb-----------ox -----------me -----------a m-----------ess-----------age----------- I -----------wil-----------l

Not Rated(0)