The annual income from an apartment complex is 23587 The ann

The annual income from an apartment complex is $23587. The annual expense is estimated to be $2208. The apartment complex could be sold for $115756 at the end of 10 years. If your MARR is 10%, how much should you pay for the apartment complex if you were to buy it now?

Solution

Hi,

Please find the detailed answer as follows:

Annual Cash Inflow = Annual Income - Annual Expense = 21809 - 2607 = 19202

Total Value to be Paid Now (Present Value) = 19202/(1+.10)^1 + 19202/(1+.10)^2 + 19202/(1+.10)^3 + 19202/(1+.10)^4 + 19202/(1+.10)^5 + 19202/(1+.10)^6 + 19202/(1+.10)^7 + 19202/(1+.10)^8 + 19202/(1+.10)^9 + 19202/(1+.10)^10 + 122149/(1+.10)^10 = $165081.70

Answer is $165081.70 or $165082.

Thanks.