Step by step solution needed for the question and with the answer thanks ☺
Present Value (PV) of Cash Flow: | |||||||
(Cash flow)/((1+i)^N) | |||||||
i=discount rate=Rate of return =8%=0.08 | |||||||
N=Year of Cash flow | |||||||
N | CF | PV=CF/(1.08^N) | |||||
Year | Cash Flow | CALCULATIONS | Present Value | ||||
Initial Cash Flow at year 0 | 0 | -£ 9,500,000 | -£ 9,500,000 | ||||
Cash flow at year 0.25(after 3 months) | 0.25 | -£ 2,000,000 | -£ 1,961,887 | ||||
First half yearly rent in advance | 0.5 | £ 380,000 | (760000/2) | £ 365,655 | |||
2nd installment of first year rent | 1 | £ 380,000 | £ 351,852 | ||||
First installment of second year rent | 1.5 | £ 380,000 | £ 338,570 | ||||
2nd installment of second year rent | 2 | £ 380,000 | £ 325,789 | ||||
First installment of third year rent | 2.5 | £ 400,900 | (760000*1.055)/2 | £ 330,732 | |||
2nd installment of third year rent | 3 | £ 400,900 | £ 318,247 | ||||
First installment of fourth year rent | 3.5 | £ 400,900 | £ 306,234 | ||||
2nd installment of fourth year rent | 4 | £ 400,900 | £ 294,673 | ||||
First installment of fifth year rent | 4.5 | £ 422,950 | (400900*1.055) | £ 299,145 | |||
2nd installment of fifth year rent | 5 | £ 422,950 | £ 287,852 | ||||
First installment of sixth year rent | 5.5 | £ 422,950 | £ 276,986 | ||||
2nd installment of sixth year rent | 6 | £ 422,950 | £ 266,530 | ||||
First installment of Seventh year rent | 6.5 | £ 446,212 | (422950*1.055) | £ 270,574 | |||
2nd installment of Seventh year rent | 7 | £ 446,212 | £ 260,360 | ||||
First installment of eighth year rent | 7.5 | £ 446,212 | £ 250,532 | ||||
2nd installment of eighth year rent | 8 | £ 446,212 | £ 241,074 | ||||
First installment of ninth year rent | 8.5 | £ 470,753 | (446212*1.055) | £ 244,732 | |||
2nd installment of ninth year rent | 9 | £ 470,753 | £ 235,494 | ||||
First installment of tenth year rent | 9.5 | £ 470,753 | £ 226,604 | ||||
2nd installment of tenth year rent | 10 | £ 470,753 | £ 218,050 | ||||
Cash Flow from Sale of the building | 10 | £ 15,500,000 | £ 7,179,499 | ||||
SUM | £ 1,427,298 | ||||||
Net Present value of proceeds | £ 1,427,298 | ||||||
Net Present value of proceeds | £ 1.43 | million | |||||
Step by step solution needed for the question and with the answer thanks ☺ An investor purchased, for an initial cost o...