Uncle Wilbur\'s trout ranch is now for sale for $30,000. Annual property taxes,
ID: 2650069 • Letter: U
Question
Uncle Wilbur's trout ranch is now for sale for $30,000. Annual property taxes, maintenance, supplies, and so on are estimated to continue to be $3,000/year. Revenues for the ranch are expected to be $10,000 next year and then decline by $400 per year through the tenth year. If you bought the ranch, you would plan to keep it for only five years and at that time sell it for the value of the land, which is $15,000. If your desired MARR is 12% per year. What is the present worth the investment? ans $X,XXX
(SHOW WORK)
Explanation / Answer
Initial Investment = $ 30000
Cash flow in Year 1 = 10000 - 3000 = $ 7000
Cash flow in Year 2 = 7000 - 400 = $ 6600
Cash flow in Year 3 = 6600 - 400 = $ 6200
Cash flow in Year 4 = 6200 - 400 = $ 5800
Cash flow in Year 5 = 5800 - 400 + 15000 = $ 20400
Present worth the investment = -30000 + 7000/1.12 + 6600/1.12^2 + 6200/1.12^3 + 5800/1.12^4 + 20400/1.12^5
Present worth the investment = $ 1186.03
Answer
Present worth the investment = $ 1186.03
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