You are considering building a small house for rent as an investment. The land costs $9,000, the materials costs $7,000, the equipment costs $6,500, and $4,000 additional working capital is required by the associated fees. It is expected that the house will result in rent of $8,000 per year for 10 years, at which time the land can be sold for $7,500, the house for $4,000, and the equipment for $5,000. All of the working capital would be recovered at the EOY 10. The annual expenses for maintenance and upkeep are estimated to total $3,200. Your other investment options have a MARR of 12% per year on projects of comparable risk, determine if you should invest in building this house. Use the AW method. a) The annual worth of the project is _____?

You are considering building a small house for rent as an investment. The land costs $9,000, the materials costs $7,000, the equipment costs $6,500, and $4,000 additional working capital is required by the associated fees. It is expected that the house will result in rent of $8,000 per year for 10 years, at which time the land can be sold for $7,500, the house for $4,000, and the equipment for $5,000. All of the working capital would be recovered at the EOY 10. The annual expenses for maintenance and upkeep are estimated to total $3,200. Your other investment options have a MARR of 12% per year on projects of comparable risk, determine if you should invest in building this house. Use the AW method. a) The annual worth of the project is _____?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You are considering building a small house for rent as an investment. The land costs $9,000, the materials costs $7,000,
the equipment costs $6,500, and $4,000 additional working capital is required by the associated fees. It is expected that
the house will result in rent of $8,000 per year for 10 years, at which time the land can be sold for $7,500, the house for
$4,000, and the equipment for $5,000. All of the working capital would be recovered at the EOY 10. The annual expenses
for maintenance and upkeep are estimated to total $3,200. Your other investment options have a MARR of 12% per year
on projects of comparable risk, determine if you should invest in building this house. Use the AW method.
a) The annual worth of the project is ___?

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