An investment company is deciding to invest $250,000 in developing a new rental property in Califonia. The company estimated annual costs are $6,000 and annual revenues are $20,000.

a) What rate of return per year will the investor make over a 15-year period ignoring the salvage value?

b) If the property can be sold for $100,000 what is the rate of return?

c) What method should the investor use to consider whether the conceptual investment cost provided is reasonable, and what factors should be considered in determining that cost?