4-6. Uncle Wilbur's trout ranch is now for sale for $40,000. Annual property taxes, maintenance, supplies, and so on are estimated to continue to be $3,000 per year. Revenues from the ranch are expected to be $10,000 next year and then to decline by $500 per year thereafter through the tenth year, If you bought the ranch, you would plan to keep it for only 5 years and at that time to sell it for the value of the land, which is $15,000. If your desired annual rate of return is 12%, should you become a trout rancher? Use the PW method.

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. …