Question

Jannat is purchasing a house today for $172,800, and expects to resell it in one year for $197,100. Using a discount rate of 6.75 percent, what is the expected net present value?

Answer 1

Based on the price that Jannat wants to sell the house in a year and the discount rate, the expected net present value is $11,837.

What is the net present value of the house?

This can be found as:

= Present value of cash inflow - Cost of the house

Solving gives:

= (197,100 / 1.0675) - 172,800

= 184,637.00 - 172,800

= $11,837

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