You have just had a tenant sign a lease contract that guarantees you payments of $100,000 at the end of each year for the next five years. What is the present value of these future cash
flows assuming an 8% discount rate?

3. An investor agreed to sell a warehouse 5 years from now to the tenant who currently rents the space. The tenant will continue to pay $20,000 in rent at the end of each year including year
five in which he will purchase the building for an additional $150,000. Assuming the investor's required rate of return is 10%, how much is this deal presently worth to the investor who was
willing to sell?

4. Assuming that an investor requires a 10% annual yield over the next 12 years, how muchwould she be willing to pay for the right to receive $20,000 at the end of year 12?

5. The purchase price of an income-producing property today is $570,000. After analysis of theexpected future cash flows, expected sales price, and expected yield, the investor determines
that the future cash flows have a present value (PV) of $580,000. Taking into consideration theprice of the property today, what is the net present value (NPV) of this investment opportunity,
and should the investor take the deal?

6. Suppose an investor is interested in purchasing the following income-producing property at a current market price of $450,000. The prospective buyer has estimated the expected cash flows
over the next four years to be as follows: Year 1 = $40,000, Year 2 = $45,000, Year 3 =$50,000, Year 4 = $55,000. Assuming that the required rate of return is 12% and the estimated
proceeds from selling the property at the end of year four is $500,000, what is the NPV of the project?

 
7. If someone pays you $1.00 per year for 20 years, what is the present value of the series of future payments discounted at 10% annually?

8. If you deposit $10.00 at the end of each year for the next 10 years and these deposits earn10% compounded annually, what will the series of deposits be worth at the end of 10 years?

9. You are considering the purchase of a small income-producing property for $150,000 that is expected to produce $50,000 of cash flows for four years. Assume your required return is 11%.
What is the Net Present Value of this investment opportunity? What is the going-in internal rate of return on this investment?

10. You have signed a new lease today to rent office space for five years. The lease payments are fixed at $4,500 per month for years 1 and 2, but rise to $5,500 for years 3 to 5. What is the
present value of this lease obligation if the appropriate discount rate is 8%?

Answer rating: 100% (QA)

PRESENT VALUE CALCULATIONS 3To calculate the present value of the cash flows from the sale of the warehouse we need to discount each cash flow back to the present value and then sum them up The cash f... View the full answer