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You re considering purchasing an apartment for $ 2 0 0 , 0 0 0 . You believe that you can earn an initial rental
Youre considering purchasing an apartment for $ You believe that you can earn an initial rental income of $ per year on it and that the rental income will grow at per year. You also believe that you can sell the apartment for $ after years. The IRR calculation is shown below: Which of the following statements about this analysis isare NOT valid?Apartment Purchase and Sale IRR Estimate Which of the following statements about this analysis isare NOT valid?
A
If this IRR exceeds the expected annualized return on other, similar apartments in this area, then this apartment may be a better investment option than the others.
B
You could have come up with a quick approximation for the IRR by observing that $ $ and $ $; and $
C
This IRR means that if you invested $ and earned on it each year, compounded annually, then youd end up with the $ total shown at the end of Year
D
This IRR means that if you invested $ and earned on it each year, compounded annually, then youd end up with the ~$ in total cash flows shown over Years
E
Statements B C and D are all invalid.
F
Statements B and C are invalid.
G
Statements C and D are invalid.
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