3 Yagajothi is thinking of investing in a rental house. The total cost to purchase the house, including legal fees and taxes, is $220,000. AlIl but $30,000 of this amount will be morigaged. He will pay $1700 per month in morlgage payments. At the end of two years, he will sell the house andat that time expects to clear S50,000 after paying of the remaining mortgage principal (in other words, he wil pay off all his debts for the house and still have $50,000 left). Rents will eam him $1500 per month for the first year and $1800 per month for the second year. The house is infairy good condition now, so he dossn't expect to have any maintenance costs for the first six months. For the seventh month, Yogajothiihas budgeted $300. This figure will be increased by S30 per monthareO Click the icon to view the table of compound interest factors for discrete compounding periods when i= 0.5%.The present value of buying the house is S. Since the present value is• YogajothiV buy the house.(Round to the nearest cent as needed.)The following table summarizes cash flows for a project:YearCash Flow at End of Year$-5,1001$3.250$4,2503$- 1,250a. Choose the appropriate expression you need to solve to find the IRR(s) for this set of cash flows. Do not solve.O A. $-5,100 + $3,250(P/F, i, 1) + $4,250(P/F, i, 2)-S-1,250(P/F, i, 3) = 0O B. $3,250 + $3,250(P/F, i, 1) + $3,250(P/F, i, 2) - $3,250(P /F, i, 3) = 5OC. $-5,100 + $3,250(A/P, i, 1) + $4,250(A /P, i, 2) - $- 1,250(A/P, i, 3) = 0O D. There is no expression that can be used.b. What is the maximum number of solutions for the IRR that could be found in part (a)?The maximum number of solutions for the IRR is.(Round to the nearest whole number as needed.)c. You have found that an IRR of 14.68 percent solves the expression in part (a). Compute the project balances for each year.YearProject Balance$1$(Type an integer or decimal rounded to two decimal places as needed.)d. Can you tell (without further computations) if there is a unique IRR from this set of cash flows?O A. There are at least seven unique IRRS that can be determined from the current information.O B. There is no possible route forward with this situation.O C. It can be determined with the current information that there is a unique IRR.O D. It is uncertain if there is a unique IRR without further computation.

The student has particularly asked for part'c' of the question. Internal rate of return refers to…

The following table summarizes cash flows for a project: Year Cash Flow at End of Year $-5,100 1 $3,250 2 $4,250 3 $-1,250 a. Choose the appropriate expression you need to solve to find the IRR(s) for this set of cash flows. Do not solve. O A. $-5,100 + $3,250(P/F, i, 1)+ $4,250(P/F, i, 2)-S-1,250(P/F, i, 3) = 0 O B. $3,250 + $3,250(P/F, i, 1) + $3,250(P/F, i, 2) - $3,250(P/F, i, 3) = 5 OC. $-5,100 + $3,250(A/P, i, 1) + $4,250(A /P, i, 2) - $- 1,250(A/P, i, 3) = 0 O D. There is no expression that can be used. b. What is the maximum number of solutions for the IRR that could be found in part (a)? The maximum number of solutions for the IRR is (Round to the nearest whole number as needed.) c. You have found that an IRR of 14.68 percent solves the expression in part (a). Compute the project balances for each year. Year Project Balance 1 2 3 (Type an integer or decimal rounded to two decimal places as needed.) %24 %24

The following table summarizes cash flows for a project: Year Cash Flow at End of Year $-5,100 1 $3,250 2 $4,250 3 $-1,250 a. Choose the appropriate expression you need to solve to find the IRR(s) for this set of cash flows. Do not solve. O A. $-5,100 + $3,250(P/F, i, 1)+ $4,250(P/F, i, 2)-S-1,250(P/F, i, 3) = 0 O B. $3,250 + $3,250(P/F, i, 1) + $3,250(P/F, i, 2) - $3,250(P/F, i, 3) = 5 OC. $-5,100 + $3,250(A/P, i, 1) + $4,250(A /P, i, 2) - $- 1,250(A/P, i, 3) = 0 O D. There is no expression that can be used. b. What is the maximum number of solutions for the IRR that could be found in part (a)? The maximum number of solutions for the IRR is (Round to the nearest whole number as needed.) c. You have found that an IRR of 14.68 percent solves the expression in part (a). Compute the project balances for each year. Year Project Balance 1 2 3 (Type an integer or decimal rounded to two decimal places as needed.) %24 %24

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter13: Investing In Mutual Funds, Etfs, And Real Estate

Section: Chapter Questions

Problem 9FPE

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