Question

This question was created from Mod 12 Financial Functions - Homework updated 1-25-2017.xlsx https://www.coursehero.com/file/28908198/Mod-12-Financial-Functions-Homework-updated-1-25-2017xlsx/

I have the NPV at 5% and 10% as well as the IRR, but I am confused on the bottom three blanks (the recommendations and the interest rate to make it better to sell now) Info if needed: NPV @ 5% = 102,770 NPV @ 10%= -29,630 IRR = 8.45%

Qﬂhin
Mrs. Smith inherited a cabin from her parents plus \$100,000 in cash. The cabin needs a complete rem:
They rent the cabin out when they are not using it. Rent is collected by a management ﬁrm, netted age
the Smith's semi annually. The Smiths want to use their inheritance to fund their children's education. |
cabin now in its current condition for \$50,000 {after taxes} and invest the proceeds and the \$100,000 a'
the improvements to the cabin and wait to sell it when her children are ready to go to school. She wou
the improvements and wait so the family can use the cabin as long as the proceeds from selling the cal investing proceeds. See cash ﬂows below. Calculate the following
Net Present Value at 5%
Net Present Value at 10%
IRR Should she sell it now or later and why? I
If she could earn 10% on the investment by selling
now what would you recommend? What is the interest rate she would have to earn |:|
in order to make it better to sell now?

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