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# Calculating NPV of Alternatives

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You have inherited an apartment complex. You are not sure whether to rent the property or to sell the property. You could receive \$65,000 per year for 10 years in rent and then sell the property for \$400,000. Or you can sell the property for \$300,000 now and payments of \$50,000 for the next 15 years. The property has a mortgage of \$130,000 that would be due immediately upon the sale; or annual payments of \$20,000 would have to be made for 10 years if you rent the property. The cost of capital is 16%.

a. Calculate the NPV for each alternative (ignore taxes).
b. Discuss the qualitative (as opposed to the quantitative) factors that might affect the decision to sell or rent.

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