Fred Mertz is looking to invest in a real estate property. The initial cost of the...

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Fred Mertz is looking to invest in a real estate property. The initial cost of the building is $350K. He expects that in the first year the building will generate $30K in cash flows. The cash flows are expected to increase by $5K per year. Fred will sell the building in the fifth year for $400K. If the required rate of return is 109%, should Fred invest in the building? (Note, in the fifth year, you have to add the cash flow to the selling price) O Yes, the IRR is 13.27% O Yes, the IRR is 11.13% No, the IRR is -25.77% O Yes, the IRR is 10.87% Fred Mertz is looking to invest in a real estate property. The initial cost of the building is $350K. He expects that in the first year the building will generate $30K in cash flows. The cash flows are expected to increase by $5K per year. Fred will sell the building in the fifth year for $400K. If the required rate of return is 109%, should Fred invest in the building? (Note, in the fifth year, you have to add the cash flow to the selling price) O Yes, the IRR is 13.27% O Yes, the IRR is 11.13% No, the IRR is -25.77% O Yes, the IRR is 10.87%

Answer rating: 100% (QA)

Fred Mertz Year Cashflow Cashflow Assumption No other cash flow except sale va... View the full answer