Submit your answers on the Excel spreadsheet, but be sure to show the calculator inputs (i.e. N, PV, etc.) to receive full credit.

1. How much would you pay for the right to receive $30,000 at the end of 8 years if you can earn a 12% return on a real estate investment with similar risk?

2. What constant amount invested at the end of each year at 8.5% annual interest rate will be worth $12,000 at the end of six years?

3. Your father will convey a property to you in 15 years. If the property is expected to be worth $350,000 when you receive it, what is the present value of the property? Your discount rate is 11.5%.

4. What is the NPV of $1,000 received at the end of the next four years and $1,800 received at the end of the fifth year if your required return is 10%?

5. Assuming no income or holding costs during the period, if you purchased a vacant parcel of land eight years ago for $1,150,000, how much would you have to sell it for today in order to yield a 12% annual return on your investment?

Solve the following questions (6-10) using TVM formulas in Excel. Show your work to receive full credit.

6. You own a building that a local business wants to rent for the next 10 years. The business owner has offered to either pay you (A) $50,000 in a lump sum today or (B) $8,500 at the end of each of next 10 years. If your required rate of return is 12%, which payment schedule should you accept?

7. How much would you pay to participate in a real estate project that pays nothing for the first 10 years and $25,000 for the following 10 years if you can earn 14% return on other investments of similar risk?

8. Calculate the IRR and NPV for the following cash flows. Assume a 12% discount rate Year	Project 1 Cash flow	Project 2 Cash flow
0	-$25,000	-$25,000
1	6,000	10,000
2	5,500	12,500
3	7,000	5,000
4	9,500	4,000
5	16,500	2,000

The rest of the questions are attached.

Student Name(s): 1 N I/Y PV PMT FV 2N I/Y PV PMT FV 3N I/Y PV PMT FV 4 Year CF I/Y NPV 1 2 3 4 5 6 Year CF 1 2 3 4 5 6 7 8 9 10 7 Year CF 1 2 3 4 5 6 7 8 9 10 8 Year Proj1 CF Proj2 CF 0 1 2 3 4 5 9 Year CF 1 2 3 4 5 6 7 8 10 Year CF 0 1 2 3 4 5 5N I/Y PV PMT FV Proj1 NPV Proj1 IRR Proj2 NPV Proj2 IRR NPV IRR 11 12 13 14 15 16 17 18 19 20 RE 3010.003 Homework 1 Time Value of Money Exercise Objective: To learn TVM calculations using a financial calculator and MS Excel Due date: Wednesday, February 22, 2017 by 9:00 a.m. Instructions: Submit on iCollege - Upload one completed Excel file into Dropbox folder You may work with up to one other classmate. If you do, please submit only one Excel file with both names on it. Solve the following questions (1-5) using a financial calculator. Submit your answers on the Excel spreadsheet, but be sure to show the calculator inputs (i.e. N, PV, etc.) to receive full credit. 1. How much would you pay for the right to receive $30,000 at the end of 8 years if you can earn a 12% return on a real estate investment with similar risk? 2. What constant amount invested at the end of each year at 8.5% annual interest rate will be worth $12,000 at the end of six years? 3. Your father will convey a property to you in 15 years. If the property is expected to be worth $350,000 when you receive it, what is the present value of the property? Your discount rate is 11.5%. 4. What is the NPV of $1,000 received at the end of the next four years and $1,800 received at the end of the fifth year if your required return is 10%? 5. Assuming no income or holding costs during the period, if you purchased a vacant parcel of land eight years ago for $1,150,000, how much would you have to sell it for today in order to yield a 12% annual return on your investment? Solve the following questions (6-10) using TVM formulas in Excel. Show your work to receive full credit. 6. You own a building that a local business wants to rent for the next 10 years. The business owner has offered to either pay you (A) $50,000 in a lump sum today or (B) $8,500 at the end of each of next 10 years. If your required rate of return is 12%, which payment schedule should you accept? 7. How much would you pay to participate in a real estate project that pays nothing for the first 10 years and $25,000 for the following 10 years if you can earn 14% return on other investments of similar risk? 8. Calculate the IRR and NPV for the following cash flows. Assume a 12% discount rate Year Project 1 Cash flow -$25,000 6,000 5,500 7,000 9,500 16,500 0 1 2 3 4 5 Project 2 Cash flow -$25,000 10,000 12,500 5,000 4,000 2,000 9. If your tenant pays you rent of $15,000 a year for 8 years, what is the present value of the series of payments discounted at 13% annually? Assume rent is paid at the end of each year. 10. You are going to invest $280,000 in a real estate investment project that generates the following cash flows. Year Cash flow 1 75,000 2 75,000 3 80,000 4 85,000 Assuming a 12.5% discount rate, what is the NPV of this project? What is the IRR? 5 120,000