(5) A real estate investment has the expected year-end annual cash flows:

Year 1 $10,000

Year 2 25,000

Year 3 50,000

Year 4 35,000

At a discount rate of 8%, what is this Present Value of the expected income stream? Hint: Solve for each years PV then sum.

6) If you were able to purchase this real estate investment (#5) for an initial cost of $90,000, what is the Net Present Value of this investment? Hint: Net Present Value = Present Value of the expected income stream less the initial cost of the investment.