You buy a rental property for $180,000. Assuming that you could sell the property for $250,000 at the end of 6 years, what is yo
ur return based on the following cash flows? Year 0 (now) = – 180,000 End of Year 1 = + 24,000 End of Year 2 = + 24,000 End of Year 3 = – 3,000 and +12,000 End of Year 4 = + 18,000 End of Year 5 = + 30,000 End of Year 6 = + 32,000
1 answer:
Answer:
15.542%
Step-by-step explanation:
For uneven cash flows such as those in this problem, there is no formula for "internal rate of return" (IRR). It must be computed graphically or iteratively. Spreadsheets and financial calculators are equipped to do this calculation. Attached is the result of the calculation done by a graphing calculator.
The sum of "present value" of each of the cash flows is zero when the discount rate is the IRR.
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4) (a) For these problems, you should take time to familiarize yourself with common fractions that appear on the unit circle. does not appear in the unit circle unless you take the quotient 1/2 divided by sqrt(3)/2 which gives you 1/sqrt(3) which is the same as sqrt(3)/3. So our numerator is 1/2 and our denominator is sqrt(3)/2.
And remember tangent is just sin/cos. So what degree has sinx as 1/2 and and cosx as sqrt(3)/2? Well, 30 degrees does, but 30 degrees is not within the range we are given. That means they are looking for a sinx that gives us -1/2 and a cosx that gives us -sqrt(3)/2 and that is 210 degrees.
And 210 degrees in radians is 7pi/6.
I hoped that made sense.
(b) This is a lot easier. What angle gives us a cos x of -sqrt(3)/2? According to the unit circle, 150 degrees and 210 degrees does. They usually want these in radians, so the answer is 5pi/6 and 7pi/6, respectively.
5) What quadrant is radian measure 5 in?
Well 2pi or roughly 6.28 is a full circle. And 5 is slightly less than 6.28, so it is probably in quadrant IV.
But to be sure let's change 5 radian to degrees:
5 * 180/pi = 900/pi = 286.48 degrees
286.48 degrees is definitely in Q4, so we are correct.