You can buy property today for $2.1 million and sell it in 6 years for $3.1 mill

Question

You can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.)

If the interest rate is 11%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)

What is the present value of the future cash flows, if you also could earn $110,000 per year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)

You can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.)

Explanation / Answer

Ans) a) If the interest rate is 11%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) You can buy the property = $        2,100,000 Interst Rate = 11% Sale Price = $        3,100,000 Present Value of after 6 years @11% Interest = 0.535 Present Value of the Sales Price = $        1,658,500 C-1) What is the present value of the future cash flows, if you also could earn $110,000 per year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) Rently income (Received at the end of the year) = $            110,000 Annuity Factor = 4.231 Present Value of Rent = $            465,410 Sale value = $        1,658,500 Total Cash inflow for the person $        2,123,910

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