Is good investment based on net present value decision rule

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Reference no: EM131303963

You are thinking about buying an investment property in Florida for $150,000 today. You expect to earn $10,000 per year of net rental income (after costs, such as property tax, HOA and maintenance, etc.) on the property and you expect to sell it in 5 years for $200,000. If the annual discount rate is 8%, is this investment attractive to you?

Please show the calculations that support your decision.

(a) What is the net present value of this investment? Is this a good investment based on the net present value decision rule?

(b) What is the IRR for this investment? What decision would be reached based on the IRR decision rule?

Reference no: EM131303963

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