You are considering buying a property with an expected net cash flow in year 1 $10,176, year 2 $13,929, year 3 $11,045, and year 4 $114,689. Your required rate of return is 13.8% and the asking price of the property is $94,730 including purchase cost. Please calculate the net present value of this property. Please rounded your answer to the nearest dollar amount.


To calculate the Net Present Value (NPV) of the property, we need to discount each of the future cash flows to their present values using the required rate of return (13.8%) and then subtract the initial investment (the asking price of $94,730). The formula for NPV is:

\[
\text{NPV} = \sum_{t=1}^{n} \frac{\text{CF}_t}{(1 + r)^t} - \text{Initial Investment}
\]

Where:
- $\text{CF}_t$ is the cash flow in year $t$,
- $r$ is the required rate of return (13.8% or 0.138), and
- $n$ is the number of years.

Given:
- Year 1 Cash Flow ($\text{CF}_1$) = $10,176
- Year 2 Cash Flow ($\text{CF}_2$) = $13,929
- Year 3 Cash Flow ($\text{CF}_3$) = $11,045
- Year 4 Cash Flow ($\text{CF}_4$) = $114,689
- Required Rate of Return ($r$) = 13.8% or 0.138
- Initial Investment = $94,730

Now, let's calculate the present value of each cash flow and then the NPV.

\[
\text{NPV} = \frac{10,176}{(1 + 0.138)^1} + \frac{13,929}{(1 + 0.138)^2} + \frac{11,045}{(1 + 0.138)^3} + \frac{114,689}{(1 + 0.138)^4} - 94,730
\]

I'll compute this now.The Net Present Value (NPV) of the property is **$846** when rounded to the nearest dollar. 

Would you like more details on the calculation, or do you have any questions? Here are five related questions you might find interesting:

1. How does a change in the required rate of return affect the NPV?
2. What does a positive NPV indicate about the investment opportunity?
3. How would the NPV change if the cash flows were expected to decrease over time?
4. What are some limitations of using NPV as an investment appraisal method?
5. How does the time value of money influence investment decisions?

**Tip:** When comparing different investment opportunities, always consider both NPV and other factors like risk, liquidity, and market conditions.

Learn how to calculate the Net Present Value (NPV) of a property investment based on expected cash flows and the required rate of return. Example calculation provided with $10,176 in year 1, $13,929 in year 2, $11,045 in year 3, and $114,689 in year 4, at a 13.8% required rate of return and an initial investment of $94,730.

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