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After graduation, you plan on heading to Newfoundland to work in a remote area. In addition to your engineering job you have decided to purchase
After graduation, you plan on heading to Newfoundland to work in a remote area. In addition to your engineering job you have decided to purchase a rental property as an investment? You found a home that you like and decide to invest your entire savings of $10,000 as a down payment. The mortgage payments are $800 a month. Unfortunately, you know that you will only be able to stay in Newfoundland for two years at which time you plan on selling the property. It is anticipated that you will sell your house quickly and clear $15,000 in profit. You will have two renters in your home, and charge them each $550 a month for the first year and $700 each for the final year. The home that you are purchasing is relatively new and maintenance cost should be low. In the first 6 months, you are estimating your maintenance costs to be $0. During the 7th month, the maintenance costs jump to $250 and then steadily increase by $25 a month thereafter. Use an interest rate of 12% compounded monthly Draw a well labeled Cash Flow diagram for the investment. Using the simple payback method, after 23 months what percentage of the original investment has been returned? Using the discounted payback method, after 23 months what percentage of the original investment has been returned? What is the payback period using the simple and discounted payback methods? Using compound interest factors, write out the equation and determine the present worth of this investment
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