Question

Suppose that an income-producing property is expected to yield cash flows for the owner of $150,000 in each of the next five years, with cash flows being received at the end of each period. If the opportunity cost of investment is 8% annually and the property can be sold for $1,250,000 at the end of the fifth year, determine the value of the property today.A) $304,704.00B) $1,449,635.50C) $1,481,143.98D) $2,000,000.00

Answer 1

B) $ 1.449.635,50

Step-by-step explanation:

YEAR 1: $150.000 PV= FV/(1+i)^n = $150.000/ (1+0,08)^1 = $138.888,89

YEAR 2: $150.000 PV= FV/(1+i)^n = $150.000/ (1+0,08)^2 = $128.600,82

YEAR 3: $150.000 PV= FV/(1+i)^n = $150.000/ (1+0,08)^3 = $119.074,84

YEAR 4: $150.000 PV= FV/(1+i)^n = $150.000/ (1+0,08)^4 = $110.254, 48

YEAR 5: $150.000+ $1.250.000= $1.400.000 PV= FV/(1+i)^n

PV= $1.400.000/ (1+0,08)^5 = $ 952.816, 48

TOTAL = $1.449.635,50