finance Micah is going to buy a rental house to begin building his real estate wealth. He is not sure how much to pay for the property because it needs work. He surveys the area and find that a home in good condition sells for $225,000 and rents are $1250 per month. He will spend the first year spending $35,000 on remodeling and receive no rent. In the second year he will begin collecting rent and will also install a new HVAC system for $18,000. He will sell the home in five years for the current full market value. Micah wants a 15% annual return on his money to take this risk and go to all the trouble. HOW MUCH SHOULD MICAH PAY FOR THE HOME? (Answer in dollars). (Hint: Use the following format in a financial calculator or Excel. Fill in the Cash Flows (CF). Cash Flow 0 (CF0) = 0. Use 0 because we do not know how much he should pay up front for the home. Stating CF0 may not be necessary in Excel. CF1= CF2= CF3= CF4= CF5= i= NPV=___________________
finance
Micah is going to buy a rental house to begin building his real estate wealth. He is not sure how much to pay for the property because it needs work. He surveys the area and find that a home in good condition sells for $225,000 and rents are $1250 per month. He will spend the first year spending $35,000 on remodeling and receive no rent. In the second year he will begin collecting rent and will also install a new HVAC system for $18,000. He will sell the home in five years for the current full market value. Micah wants a 15% annual return on his money to take this risk and go to all the trouble.
HOW MUCH SHOULD MICAH PAY FOR THE HOME? (Answer in dollars). (Hint: Use the following format in a financial calculator or Excel. Fill in the Cash Flows (CF). Cash Flow 0 (CF0) = 0. Use 0 because we do not know how much he should pay up front for the home. Stating CF0 may not be necessary in Excel. CF1= CF2= CF3= CF4= CF5= i= NPV=___________________
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