What is the NPV of $1,000 received at the end of the next four years and $1,800 received at the end of the
4. What is the NPV of $1,000 received at the end of the next four years and $1,800 received at the end of the
fifth year if your required return is 10%?
5. Assuming no income or holding costs during the period, if you purchased a vacant parcel of land eight years ago for $1,150,000, how much would you have to sell it for today in order to yield a 12% annual return on your investment?
Solve the following questions (6-10) using TVM formulas in Excel. Show your work to receive full credit.
6. You own a building that a local business wants to rent for the next 10 years. The business owner has offered to either pay you (A) $50,000 in a lump sum today or (B) $8,500 at the end of each of next 10 years. If your required rate of return is 12%, which payment schedule should you accept?
7. How much would you pay to participate in a real estate project that pays nothing for the first 10 years and $25,000 for the following 10 years if you can earn 14% return on other investments of similar risk?
8. Calculate the IRR and NPV for the following cash flows. Assume a 12% discount rate
| Year | Project 1 Cash flow | Project 2 Cash flow |
| 0 | -$25,000 | -$25,000 |
| 1 | 6,000 | 10,000 |
| 2 | 5,500 | 12,500 |
| 3 | 7,000 | 5,000 |
| 4 | 9,500 | 4,000 |
| 5 | 16,500 | 2,000 |
9. If your tenant pays you rent of $15,000 a year for 8 years, what is the present value of the series of payments discounted at 13% annually? Assume rent is paid at the end of each year.
10. You are going to invest $280,000 in a real estate investment project that generates the following cash flows.
Assuming a 12.5% discount rate, what is the NPV of this project? What is the IRR?
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