What is the present worth of this investment

Assignment Help Microeconomics
Reference no: EM132194134

Question - Yogajothi is thinking of investing in a rental house. The total cost to purchase the house, including legal fees and taxes, is £115 000. All but £15 000 of this amount will be mortgaged. He will pay £800 per month in mortgage payments. At the end of two years, he will sell the house, and at that time expects to clear £20 000 after paying off the remaining mortgage principal (in other words, he will pay off all his debts for the house, and still have £20 000 left). Rents will earn him £1000 per month for the first year, and £1200 per month for the second year. The house is in fairly good condition now so that he doesn't expect to have any maintenance costs for the first six months. For the seventh month, Yogajothi has budgeted £200. This figure will be increased by £20 per month thereafter (e.g., the expected month 7 expense will be £200, month 8, £220, month 9, £240, etc.). If interest is 6% compounded monthly, what is the present worth of this investment? Given that Yogajothi's estimates of revenue and expenses are correct, should Yogajothi buy the house?

Reference no: EM132194134

Questions Cloud

What did you learn from experience : Recall a time when you gave a speech in front of a group. How did you feel? What was your experience? What did you learn from your experience.
Who should decide who receives the drug : Should drugs with an astronomical cost be discussed with patients if the cost will not be covered? Who should decide who receives the drug.
Challenges to leadership in the 21st century : List and explain three challenges to leadership in the 21st century. Give examples
What are the three ways to determine the cost of equity : Why is there a cost for reinvested (retained) earnings? What are the three ways to determine the cost of equity?
What is the present worth of this investment : If interest is 6% compounded monthly, what is the present worth of this investment? Given that Yogajothi's estimates of revenue and expenses are correct
Explain the use of information management tools : Explain the use of information management tools and technologies to monitor and improve health care delivery and patient outcomes.
What are the basic concepts in medical ethics : What are the basic concepts in medical ethics? How much should hospitals or government agencies intervene between patients and doctors?
Ceo salaries and bonuses worker wages and benefits : How much should the government try to control compensation CEO salaries and bonuses worker wages and benefits?
Describe current situation and recent performance of economy : Describe the current situation and recent performance of the economy. Areas covered should include the levels and growth rates of total and per capital GDP

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Revenues generated in first year of operations 15 million

you have worked as a real estate agent for 10 years and are earning about 100000 per year with your current agency. you

  Determining optimal markups and prices

You're the manager of monopoly that sells the product to two groups of consumers in different parts of country. Group 1's elasticity of demand is -2, while group 2's is -6. your marginal cost of producing the product is $10.

  What is the long run equilibrium price and quantity

What is the long run equilibrium price and quantity? How many firms serve this market in equilibrium? Describe the long run supply curve for this industry.

  Describe any potential sources of bias

This statement was based on the fact that only 51 percent of those responding to a mail survey indicated that they were satis?ed with their jobs. Describe any potential sources of bias that might limit the researcher's ability to draw conclusions ..

  Youve recently learned that the company where you work is

youve recently learned that the company where you work is being sold for 380000. the companys income statement

  Arguments strengthen the idea of floating exchange rates

Which of the following arguments strengthen the idea of floating exchange rates? Trade deficits can be corrected through changes in exchange rates.

  Govt should intervene to enforce antitrust law or not

Consider the following situations related to a sports stadium in a city. Assume this is the primary venue for sports games. Decide whether the city government is likely to intervene to enforce antitrust law or not. (a)The stadium is purchased by a..

  Explain how that would affect the businesss strategic option

From the scenario, describe the business implications of an increase in the required reserve ratio from 4% to 7%. Explain how that would affect the business's strategic options.

  Which equation is identified or not identified

suppose you have the following simultaneous equations model:which are the endogenous variables (y & x3) and the exogenous (Z, X2) Im lost as to what X1 is because it appears on both equations? also which equation is identified or not identified or ..

  Suppose that marginal utility of good a is 4 times the

suppose that marginal utility of good a is 4 times the marginal utiltiy of good b but the proce of good ais only 2

  1 john works at a coffee shop and makes 10 per hour he

1. john works at a coffee shop and makes 10 per hour. he decides to leave work an hour early to go see a movie that

  How would you summarize opportunity cost

In your own words, how would you summarize opportunity cost? How does the concept of opportunity cost apply to this decision? Explain in a brief paragraph.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd