What is the net present value of a deal

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Question - You expect annual cash flows from a certain property as follows:

Year 1 $20,000

Year 2 $22,000

Year 3 $30,000

Year 4 $31,000

Year 5 $40,000

In addition, you expect that you can sell the property at the end of the 5th year for 12 times its expected cash flow that year. If the opportunity cost of capital is 8% per year, then what is the net present value (NPV) of a deal in which the investor has to pay $300,000 for the property (at the end of Year O, one year prior to the first cash flow)?

Reference no: EM133174104

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