Should steven invest in the apartment building

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Question - Steven is considering investing $7,000,000 she just earned by selling his investment portfolios. At this moment, he is considering the following investment opportunities for the next 10 years:

Purchase an apartment building immediately for $ 7,000,000 and the building will generate rental income. Net rental income from the building will be $800,000 per year for 5 years (the first rental income is received one year from today). Starting from the 6th year until the 10th, the net rental income drops to $200,000 per year due to a long recession. At the end of the 10th year, the building will be sold for $ 10,000,000.

Should Steven invest in the apartment building? Use a discount rate of 9% compounded monthly to the cash flows from the building.

Reference no: EM133119320

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