The annual rental income from a duplex is $9600 and annual expenses are $2500. If the...
The annual rental income from a duplex is $9600 and annual expenses are $2500. If the potential buyer anticipates that the duplex could be sold for $75000 at the end of 10 years, what is the purchasing price that could be justified? Assume that the interest rate is 8% per annum for this scenario. Draw the cash flow diagram for this model.
Homework Answers
Purchasing price
= (9600-2500)*(P/A,8%,10)+75000*(P/F,8%,10)
= 7100*6.710081+75000*0.463193
= 47641.5751+34739.475
= 82382
| Year | Initial cost | Annual income | Annual expense |
| 0 | -82832 | ||
| 1 | 9600 | -2500 | |
| 2 | 9600 | -2500 | |
| 3 | 9600 | -2500 | |
| 4 | 9600 | -2500 | |
| 5 | 9600 | -2500 | |
| 6 | 9600 | -2500 | |
| 7 | 9600 | -2500 | |
| 8 | 9600 | -2500 | |
| 9 | 9600 | -2500 | |
| 10 | 84600 | -2500 |
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