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19. Suppose a certain property is expected to produce net operating cash flows annually, as follows, at the end of each of the next
19. Suppose a certain property is expected to produce net operating cash flows annually, as follows, at the end of each of the next five years: Year 1 = $40,000 Year 2 = $45,000 Year 3 = $50,000 Year 4 = $55,000 Year 5 $45,000 The property is current selling for $400,000. You have forecasted, at the end of the fifth year we will assume the property will (or at least could) be sold for $500,000. If the required rate of return on projects of similar risk is 15%. A. What is the net present value (NPV) of this investment project and should it be purchased? B. What is the Internal Rate of Return offered by the project?
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