12. You are considering the purchase of a tract of timber land today as an investment. Last years timber harvest that just sold produced a net income of $150,000 a year. You expect Timber prices to increase on average by 3% a year into the foreseeable future. The current asking price of the land is $2,200,000. If you required rate of return is 8%, should you buy the land? D1 Value Do (1 +g) k-g k-g Should you buy if after additional consideration, you decide the investment is riskier than originally thought and raise your required rate of return to 12%? Value Do (1 +g) k-g D1 k-g
12. You are considering the purchase of a tract of timber land today as an investment. Last years timber harvest that just sold produced a net income of $150,000 a year. You expect Timber prices to increase on average by 3% a year into the foreseeable future. The current asking price of the land is $2,200,000. If you required rate of return is 8%, should you buy the land? D1 Value Do (1 +g) k-g k-g Should you buy if after additional consideration, you decide the investment is riskier than originally thought and raise your required rate of return to 12%? Value Do (1 +g) k-g D1 k-g
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...
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