Urban Housing Agency (UHA) is considering contracts with private developers to provide lowincome housing at various locations in the city. The start-up costs to UHA for each location are $115,000, all...

Urban Housing Agency (UHA) is considering contracts with private developers to provide lowincome housing at various locations in the city. The start-up costs to UHA for each location are $115,000, all of which must be paid to the developers in cash at the beginning. The housing rents would provide UHA net cash flows of $3,000 per month for the first 12 months, $4,000 per month for the following 12 months, and $5,000 for the remaining 12 months of a 3-year contract. UHA only invests in projects that earn an annual rate of return of at least 12 percent. What rate of return would UHA earn on the contracts? Should UHA accept the contract? Why? Do not solve this problem using a financial calculator.