Question

Suppose that a property can generate cash flows of $20,000 per year for eight years and can sell for $160,000 at the end of the investment period. Assuming a discount rate of 10%, what is the present value of this property?

Answer 1

$181,339.70

Step-by-step explanation:

Present value is the sum of the discounted cash flows from an investment.

Present value can be calculated using a financial calculator.

Cash flow each year from year 1 to 7 = $20,000

Cash flow in year 8 = $160,000 + $20,000 = $180,000

Discount rate = 10%

Present value = $181,339.70

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