QUESTION 12

1. Assume that your investment decision for 2372-2374 is based on a net present value calculation. You will only go ahead with the investment if the Net Present Value calculation is positive. Your Net Operating Income over the next 25 years must be positive. The discount rate you will use is 24%. You have hired an advisor who shows you how you can generate $85,000 per year in net operating income and he also believes you can buy the property for $3,500,000 today and sell it for $7,000,000 at the end of 25 years. Your investment rule is to make the investment if the net present value is positive.

   You should make this investment. The NPV is positive.

   TRUE OR FALSE?