An investor has invested $250,000 in a new rental property. Her estimated annual

Question

An investor has invested $250,000 in a new rental property. Her estimated annual costas are $6,000 and annual revenues are $20,000. What rate of return per year will the investor make over a 30-year period ignoring the salvage value? If the property can be sold for $200,000 what is the rate of return?

1.State the problem or opportunity

2.Define the goal or objective

3.Delineate the feasible alternatives

4.Select the criterion (PW or NPV, AW, RoR)

5.Summarize the relevant data

6.Predict the outcomes for each alternative

7.Recommended course of action (i.e., the best alternative)

Explanation / Answer

1.Opportunity for this investor is to earn rental income and then sale it in market as the cost of property increases as the time lapses.

2. Goal or objective is the specific requirement of investor considering which investment had been made by investor. Besides increasing capital, the goal of investor may be to meet out retirement funds requirements or any other future requirements.

3. Feasible Alternative for investments include hedge funds, managed futures, commodities and derivatives contracts.

4.

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