GailKT Posts: 7, Reputation: 1 New Member #1 Jun 1, 2007, 07:25 AM
Net Present Value and Internal Rate of Return Method
I want to know if an investment during the past four years have earned at least a 12% return.

a) A small building was purchased for \$50,000.00. Received rental income of \$8,000.00 for each of the four years and sold the building this year for \$55,000.00.

Using the net present value method, determine whether this investment earned at least 12%.
 omsailogistic Posts: 39, Reputation: -1 Junior Member #2 Jun 3, 2007, 11:31 AM
\$50000 * (1+.12) raise to power 5 = \$ 55000

(1.12) raise to power 5 = \$55000 / \$ 50000
(1.12) raise to power 5 = 1.1

Now find the future value table and see 12% rate at 5 year if the value is 1.1 then the investment has earned the desired 12% rate of return otherwise not.

I do not have any future value table right now...

and if you want to know what is the desired rate of rate on the investment if it is not 12 % see the 5th year all over the returns and the return which is close to 1.1 shall be the desired return

Hope u may find it helpful...