Time Value of Money and Cash Flow Analysis $(9$ marks$)$

A $3$rd year Queen$$s Engineer recently inherited $$30,000,$ and is considering investing in a rental house for her final year

at school. She will use the inheritance as a down payment, and the remainder of the costs will be mortgaged. She will

pay $$1000$ per month in mortgage and municipal tax payments. At the end of one year $($about the time of graduation$),$

she intends to sell the house, and anticipates being able to clear close to $$40,000($after paying off the remaining

mortgage principal$),$ given the current trend in increases in house prices.

She anticipates rents will earn her $$1100$ per month. The house she wants to buy is in good condition, so she does not

anticipate any maintenance costs for the first six months. For the seventh, eighth and ninth month, she has budgeted

$$200,$ and this amount will increase by $$20$ per month thereafter $($i$.$e$.,$ the expected $9$ th month expense will be $$200,$

month $10,$ $$220,$ month $11,$ $$240,$ etc$)$