Question

I have the opportunity to buy an apartment complex. The apartment complex has a useful life of 3 years.
The owner of the apartment complex will sell it to me for $70,000.   

If I buy the apartment complex, I collect cash inflows rent payments of $30,000 per year

Assume at the end of each year) for the next 3 years

Other than the $70,000 purchase price, there will be no other cash outflows during the year 3 period.

Other than the rent payments, there will be NO other Cash Inflows during the 3year period.
Assume that investments of like risk are paying 15%. What should I do? Should I buy it or not buy it?

Answer 1

NPV :
NPV = PV of Cash Inflows - PV of Cash Outflows
If NPV > 0 , Project can be accepted
NPV = 0 , Indifference point. Project can be accepted/ Rejected.
NPV < 0 , Project will be rejected.

Year	CF	PVF @15%	Disc CF
0	$ -70,000.00	1.0000	$ -70,000.00
1	$ 30,000.00	0.8696	$ 26,086.96
2	$ 30,000.00	0.7561	$ 22,684.31
3	$ 30,000.00	0.6575	$ 19,725.49
NPV	$   -1,503.25

As it has -ve NPV, It is not adviceable to Buy.

Pls do rate, if the answer is correct and comment, if any further assistance is required.