Problem:
Suppose that annual income from a rental property is expected to start at $1,200 per year and decrease at a uniform amount of $35 each year after the first year for the 17-year expected life of the property. The investment cost is $8000, and i is 10% per year. Is it a good investment? Assume that the investment occurs at time zero (now) and that the annual income is first received at EOY one.
Required:
Question: What is the present equivalent of the rental income?
Note: Provide support for your rationale.