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A real estate investor likes to “flip” houses. That is, he likes to buy a house...

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Finance

A real estate investor likes to “flip” houses. That is, he likesto buy a house at a low price and then “flip” or sell the house fora higher price. The investor is looking at a foreclosed house thatwill cost $241,374.00 today. He will invest an additional$42,764.00 in the first year of owning the house to upgrade itsfeatures. He then believes he can sell the house for $420,169.00 atthe end of the second year. What is the NPV of this investment ifour investor wants to earn a 19.00% annual return on the house?

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Transcribed Image Text

A real estate investor likes to “flip” houses. That is, he likesto buy a house at a low price and then “flip” or sell the house fora higher price. The investor is looking at a foreclosed house thatwill cost $241,374.00 today. He will invest an additional$42,764.00 in the first year of owning the house to upgrade itsfeatures. He then believes he can sell the house for $420,169.00 atthe end of the second year. What is the NPV of this investment ifour investor wants to earn a 19.00% annual return on the house?

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