$500,000 and its price is growing at 5 percent per year. How much should Suzy invest in a project at the end of each year for the next 5 years in order to accumulate enough money to buy her dream house with cash at the end of the fifth year? Assume the project pays 12 percent rate of return. 17) To buy his favorite car, Larry is planning to accumulate money by investing his Christmas bonuses for the next five years in a security which pays a 10 percent annual rate of return. The car will cost $20,000 at the end of the fifth year and Larry's Christmas bonus is $3,000 a year. Will Larry accumulate enough money to buy the car? 18) Meston Place is an office building that has recently been put up for sale. It is rented by one tenant who has ten years remaining on their lease. The rent for years 1-3 has been fixed at ¢300,000 per annum, the rent for years 4-6 is fixed at ¢420,000 per annum and the rent for years 7-10 has been fixed at ¢510,000 per annum. The rent is payable annually and in arrears. When the lease ends, it is forecast that the property will sell for ¢2 million. The property is currently being advertised for ¢2.7 million and the landlord has already paid an advertisement cost of ¢500,000. The risk on investment of this kind is currently
16) Suzy wants to buy a house but does not want to get a loan. The average price of her dream house is $500,000 and its price is growing at 5 percent per year. How much should Suzy invest in a project at the end of each year for the next 5 years in order to accumulate enough money to buy her dream house with cash at the end of the fifth year? Assume the project pays 12 percent
17) To buy his favorite car, Larry is planning to accumulate money by investing his Christmas bonuses for the next five years in a security which pays a 10 percent annual rate of return. The car will cost $20,000 at the end of the fifth year and Larry's Christmas bonus is $3,000 a year. Will Larry accumulate enough money to buy the car?
18) Meston Place is an office building that has recently been put up for sale. It is rented by one tenant who has ten years remaining on their lease. The rent for years 1-3 has been fixed at ¢300,000 per annum, the rent for years 4-6 is fixed at ¢420,000 per annum and the rent for years 7-10 has been fixed at ¢510,000 per annum. The rent is payable annually and in arrears. When the lease ends, it is
(a) Calculate the payback of the investment and comment on your results.
Step by step
Solved in 2 steps
