I purchased a house and intend to hold the property indefinitely. I plan to rent the house to generate rent income. The first year’s rent is $15,000, and will grow it at the rate of 10% for 3 years after that. After the initial 4 years, the growth rate in the rent will stabilize at 5%. The maintenance will cost $5,000 a year. The appropriate discount rate is 20%. a. What is the present value of rent income? b. What is the present value of the house? c. What is the present value of maintenance costs?

Q: You wish to purchase a home for $500,000. You will make payments of $30,000 at the end of every…

A: A sum borrowed to meet specific personal or business funding needs is recognized as a loan/mortgage.…

Q: You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on your…

A: Future value is that amount which will be require to paid at some specified period of time. It…

Q: Your parents say they will loan you $15,000 today for college. They would like to be repaid $21,000…

A: Present value = pv = $15,000 Future value = fv = $21,000 Time = t = 10 years

Q: The annual income from an apartment house is $33,600. The annual expense is estimated to be $8000.…

A: Return on investment = 6% = 0.06 Initial investment = $349,000 Annual net income = Annual income -…

Q: You want to buy a $210,000 home. You plan to pay $10500 as a down payment, and take out a 30 year…

A: The loan amount would be the remaining amount after deducting the down payment from the purchase…

Q: You found your dream home! The down payment is $29,000. However, you still need 40% of the down…

A: Calculations of compound interest compounded on daily basis on borrowed amount is shown below:…

Q: a)How much should you be willing to pay today for Gopher Gardens? b) If you can buy the property…

A: The price we are willing to pay is the PV of all future rent and selling price of the property…

Q: ou have secured a loan from your bank for two years to build your home. The terms of the loan are…

A: Working Note #1 Calculation of loan amount after 2 year period: Loan amount after 2 year period=…

Q: The annual income from a rented house is $35,000. The annual expenses are $5,000. If the house can…

A: Annual Income = $35,000 Annual Expenses=$5,000 Net Cashflow =$35,000 -$5,000 =$45,000 Ending…

Q: You decide to buy a house costing $5,000,000. You pay $1,000,000 down, and the remainder will be…

A: A home equity loan is a loan provided against the equity of a property. The equity value at any…

Q: Your company will generate $74,000 in annual revenue each year for the next seven years from a new…

A: Present Value = future value discounted at 7.25%

Q: You currently have a loan outstanding on one of your investment properties. The current balance of…

A: We have to find the incremental cost of refinancing. For that we will have to find the incremental…

Q: Should you buy an asset that will generate income of $1,000 per year for 10 years? The price of the…

A: YEAR CASH FLOW      0 -7500 1 1000 2 1000 3 1000 4 1000 5 1000 6 1000 7 1000 8…

Q: You planned to borrow $575,000 for a house at 2.9% interest for 30 years.  You find a house that you…

A: A loan is a sum of money obtained from outside sources such as banks and repaid over time in fixed…

Q: suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and…

A: When a buyer buys goods from a seller and is not able to pay the entire amount at the time of…

Q: Six years ago you took out a loan of $180, 000 to finance the purchase of ahome $220, 000. The loan…

A: The problem is asking us to calculate the new monthly payment after refinancing a home loan. The…

Q: Specifically, calculate the present value of future rents. Use a discount rate of 5%. 1. A parcel of…

A: The question is based on the concept of present value calculation of perpetual cash flow with…

Q: Nikul

A: The objective of this question is to calculate the total cost of the loan including the principal,…

Q: a. Payment on old loan b. Current balance c. Monthly payment $ 1,199.10

A: We can determine the monthly payment using the formula below:Once we have determine the monthly…

Q: The house price is $700 thousand. You will fund $100 thousand of this upfront, and fund the…

A: The price of house = $700,000. DownPayment =$100,000 Mortgage loan Tenure = 30 year  The mortgage…

Q: Suppose you wish to borrow Php 20,000,000 to buy a parcel of real estate. The lender is willing to…

A: The mortgage payment are amortize over 10 years as per the schedule shown in excel.

Q: You found your dream home! The down payment is $29,000. However, you still need 40% of the down…

A: Computation:

Q: You are saving for a Porsche Carrera Cabriolet, which currently sells for nearly half a million…

A: Present value is the current value of a future amount that is to be received or paid out.     Future…

Q: You want to build a $40,000 shed on your property in 3 years. You find that the bank can offer…

A: The cost of the shed after 3 years will be $40,000 and if the shed is built today, the cost will be…

Q: 1. Calculate the present worth of a $ 580,000 home with a mortgage rate of 5% compounded monthly for…

A: The solution requires understanding of time value of money. We need to calculate future values and…

Q: 6) You buy a $400,000 house. The loan is for 25 years and is at 4.5% monthly. What is the monthly…

A: Loan is a contract between lender & borrower where lender provides funds to borrower for…

Q: payments with the first payment being made at the end of this year. If the payments are to grow by…

A: This is present value of growing of annuity problem can be solved using formula.Loan…

Q: You found your dream home! The down payment is $29,000. However, you still need 40% of the down…

A: Continuous interest is computed below:

Q: You anticipate an improvement on your property will require replacement in 9 years. How should rent…

A: Cost of improvement of $45,000 is the present value (PV) of the rent (P) to be increased. Interest…

Q: Nikul

A: The objective of this question is to calculate the total cost of the loan including the principal,…

Q: You found your dream home! The down payment is $29,000. However, you still need 40% of the down…

A: The interest calculated on the initial or principal amount which includes all the accumulated…

Q: Ssume you are buying an apartment with $ 500,000. Consider you make 8% per year (i=8%) on this…

A: Capital recovery amount is that amount which should be recovered.

Q: You can afford to pay $15,000 at the end of each of the next 30 years to repay a home loan. If the…

A: Present value of annuity is the current worth of future annual cash flows over a period of time at a…

Q: You borrowed $300,000 to build a home by taking out a 30 year loan that has an interest rate of 12%.…

A: Present Value = pv = $300,000Time = t = 30 YearsInterest Rate = r = 12%

Q: I have been considering refinancing my house. To do so, I will need to borrow $300,000. The loan…

A: Payment per period can be calculated using PMT function in excel.PMT(rate, nper, pv, [fv],…

Q: You estimate your monthly gas and maintenance expenses for your delivery vehicles will be $1,500 a…

A: Monthly expenses (P) = $ 1500 Period = 7 Years Period in months (N) = 7*12 = 84 Annual interest rate…

Q: ou just purchased a parcel of land for $54,000. To earn a 11% annual rate of return on your…

A: FV = PV * (1 + r)^nWhere FV = Future ValuePV = Present Value of Land = $54,000r = rate of interest =…

Q: Your home has a value today of $160,000. You expect prices to increase at 8% per year (compounded…

A: In case when the amount is expected to rise at different rates for different time interval, future…

Q: Should you buy an asset that will generate income of $1,500 per year for eight years? The price of…

A: The intrinsic price (actual worth) of an asset is present value of its future income. To solve this…

Q: In 10 years, you plan to retire and buy a lotin the province. The lot you are looking at currently…

A: The time value of money concept asserts that an amount of money is worth more now than it would be…

Q: Suppose you want to purchase a property for $205,000 and you have $30,000 to put down as a down…

A: An effective yearly yield is defined as the overall profit or return on a bond received by an…

Q: Assume you won the state lottery and you are entitled to $5,000,000. If you choose not to take the…

A: Present value of the amount =  $5,000,000Amount to be received weekly over next 10 years1 year = 52…

Q: You are trying to convince an investor into buying a rental apartment unit that fetches a rent of…

A: Present value is the equivalent value of money today that is to be received in the future times…

Q: Suppose you want to purchase a home for $525,000 with a 30-year mortgage at 4.84% interest. Suppose…

A: Price of Home = $525000 Inetest Rate(r) = 4.84%/12 = 0.4033% Downpayment = 30% Amount financed…

Present Value

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. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.