An investor bought a oneacre lot on the outskirts of a city

An investor bought a one-acre lot on the outskirts of a city for $9000 cash. Each year she paid $80 of property taxes. At the end of 4 years, she sold the lot for a net value of $15,000. What rate of return did she receive on her investment? A mine is for sale for $450,000. It is believed the mine will produce a profit of $100,000 the first year, but the profit will decline $5000 a year after that, eventually reaching zero, whereupon the mine will be worthless. What rate of return would be earned on the mine? An apartment building in your neighborhood is for sale for $140,000. The building has four units, which are rented at $500 per month each. The tenants have long-term leases that expire in 5 years. Maintenance and other expenses for care and upkeep are $8000 annually. A new university is being built in the vicinity and it is expected that the building could be sold for $160,000 after 5 years. What is the internal rate of return for this investment? An engineering student is deciding whether to buy two 1-semester parking permits or an annual permit. The annual parking permit costs $250 due August 15th, and the semester permits are $160 due August

Solution

Given Initial investment = $450000

Profit in 1st year = $100000

Yearly decline in profit = $ 5000

So it will take (100000/5000) = 20 years to become zero

Total Profit Earned in 20 years = add all the profits like $100000+$95000+$90000 .....+$5000+0 =$1050000

Average Annual Profit = (Total profit/ No of years)= (1050000/20) = $52500

Rate of return = (Average Annual Profit/Initial investment )*100 = (52500/450000)*100 = 11.67%