g An investor has invested $600,000 in a new rental property. Her estimated annual costs are $16,000 and annual revenues are $48

Question

3 years ago

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g An investor has invested $600,000 in a new rental property. Her estimated annual costs are $16,000 and annual revenues are $48

,000. What rate of return per year will investors make over a 30 year-period if the property can be sold for $500,000 at the end of the 30-year period

Business

1 answer:

Tamiku [17] · Answer 1 · 2022-03-15T01:18:54+03:00

Answer:

5.09%

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator.

Cash flow in year 0 = $-600,000

Cash flow each year from year 1 to 29 = $48,000 - $16,000 = $32,000

Cash flow in year 30 = $32,000 + $500,000 = $532,000

IRR = 5.09%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you