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About LinkBacksThe cash flow timeline is almost correct. However, for year 0, the buying expenses shouldn't have been neglected.
The timeline should be:
Year 0: -45000 - 2180 = -47180
Year 1: -500
Year 2: -500
Year 3: -500
Year 4: -500 + 105000 - 5000 = 99500
For the following problem
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Land is bought for $45000 with buying expenses of $2180, and interest rate is 9% p.a. The land is kept for 4 years with annual costs of $500, and sold for $105000 at the end of the 4th year (selling expenses are $5000).
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I assume that the the cash flow time line is
-45000,-500,-500,-500,99500
Since I assume the annual costs come at the end of each year.
The cash flow timeline is almost correct. However, for year 0, the buying expenses shouldn't have been neglected.
The timeline should be:
Year 0: -45000 - 2180 = -47180
Year 1: -500
Year 2: -500
Year 3: -500
Year 4: -500 + 105000 - 5000 = 99500
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