Question: 1) What is the Present Value using a discount rate of 8% given the following cash flows? Year 1: 40,000 Year 2: 42,000 Year 3:

1) What is the Present Value using a discount rate of 8% given the following cash flows?

Year 1: 40,000

Year 2: 42,000

Year 3: 44,000

Year 4: 45,000

Year 5: 37,000

And, a sale occurs at the end of year 5 at a price of $425,000.

2) Same facts as #1. Would you pay the asking price of $502,000 ? Yes or no for NPV being positive or negative.

3) Same facts as #1. If you pay $395,000 for the deal, what is the Internal Rate of Return?

4) If you financed the deal in #3 with a loan at 4.00% at a LTV of 70% over 20 years, what is the annual debt service (calculate the monthly payment and multiply by 12)

5) For the property in #4, what is the cash flow after debt in Yr. 2

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