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help with Investment Planning Q3.part ii n iii

Discussion in 'Introductions' started by skgogs, 30th Sep, 2011.

  1. skgogs

    skgogs New Member

    Joined:
    29th Sep, 2011
    Posts:
    1
    Location:
    melbourne
    hey guys,
    if anyone can help me with finishing part ii and iii of Question 3 of IP1 assignment.

    just wanna know that do we need to add 95,000 (desired profit)to the cash flow calculations or $130,000 (which is input from pocket)

    cheers
     
  2. AAB

    AAB Member

    Joined:
    1st Oct, 2011
    Posts:
    10
    Location:
    Melbourne, Vic
    hey guys,

    Hi skgogs,
    you dont need to add the difference of $130k at all in the PV calculations as what she has put in (out of pocket) isnt considered.

    You do however, need to include the total projected sell price of $575,000. I used the following formula:

    Year 1 Year 2 Year 3 Final Year
    20,665 + 21,307 + $21,862 + $575,000
    PV = 1.075 (1.075)2 (1.075)3 (1.075)3

    PV = $19,223 + $18,432 + $17,602 + $462,963

    PV = $518,220

    hope this helps.