Nicholos Kohrs is investing in some rental property in Moon Township and is inve

Question

Nicholos Kohrs is investing in some rental property in Moon Township and is investigating his income from the investment. Mr. Kohrs knows the rental revenue will increase each year, but so will the maintenance expenses. Mr. Kohrs has been able to generate the data that follow regarding this investment opportunity. Assume that all cash flows occur at the end of each year and that the purchase and sale of this property are not relevant to the study. If Mr. Kohrs’s MARR = 17% per year, what is the FW of Mr. Kohrs’s projected net income? ( 5.4) Is Mr. Kohrs's rental investment a profitable undertaking?

Explanation / Answer

Answer: Yes, Mr. Kohrs's rental investment is a profitable undertaking.

MARR 17% Year Reveune Expenses Net income 0 0 0 0 1 12000 9500 2500 2 12150 9700 2450 3 12250 9900 2350 4 12350 10100 2250 5 12450 10300 2150 6 12550 6100 6450 7 12650 6300 6350 8 12750 6500 6250 9 12850 6700 6150 10 12950 6900 6050 11 13050 7100 5950 12 13150 7300 5850 13 13250 7500 5750 14 13350 7700 5650 15 13450 7900 5550 NPV $20,588.62

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