1. Suppose that your required rate of return on a duplex is 12 percent. You are shown one such property which has an asking price of $30,000. The sales representative shows you the following cash flow projections for a holding period of 6 years:

Year 1: Year 2: Year 3: Year 4: Year 5: Year 6:

$4,500 $5,000 $6,000 $3,000 $8,000 $20,000

a. Should you buy the investment?

b. What would be your expected rate of return?

2. What is the net present value of the duplex investment in Problem #9 if the asking price is $28,000 and your required rate of return is 12 percent? 10 percent? 15 percent?