Present Values. You can buy property today for $3 million and sell it in 5 years for $4 million. (You earn no rental income on the property.) (LO5-2) a. If the interest rate is 8%, what is the present value of the sales price? b. Is the property investment attractive to you? c. Would your answer to part (b) change if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year.
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- . You can buy property today for $2.3 million and sell it in 6 years for $3.3 million. (You earn no rental income on the property.) If the interest rate is 9%, what is the present value of the sales price? Formula PV = C / (1 + r)n PV = 3.3 / (1 + 9%)6 PV = 3.3 / (1.09)6 PV = 1,967,682.18 Is the property investment attractive to you? I am paying 2.3 million for the property and it is currently worth 1.9 million. I don’t care for paying more for what it is currently worth today. However, if I kept the land for 6 years, I could sell it for 3.3 million. That would be a net profit of 1 million. Yes, it is attractive to me. What is the present value of the future cash flows, if you also could earn $130,000 per year rent on the property? The rent is paid at the end of each year. Formula: FVn = C x (1 + r)n FVn = 130k x (1.09)6 FVn = 218,023.01 + 780,000 (130 x 6 years) FVn = 998,023.01 additional 998,023.01 + 3,300,000 = 4,298,023.01 Is the property investment attractive…You can buy property today for $2.0 million and sell it in 4 years for $3.0 million. (You earn no rental income on the property.) a. If the interest rate is 12%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? c-1. What is the present value of the future cash flows, if you also could earn $100,000 per year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) c-2. Is the property investment attractive to you now?You can buy property today for $3.9 million and sell it in 5 years for $4.9 million. (you have no rental income on the property). 1. If the interest rate is 8% what is the present value of the sales price? 2. Is the property investment attractive to you? 3. What is the present value of the future cash flows if you are could earn $290000 per year rent on the property? The rent is paid at the end of each year. 4. Is the property investment attractive to you now?
- You can buy property today for $3.1 million and sell it in 6 years for $4.1 million. (You earn no rental income on the property.) a. If the interest rate is 7%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? yes or no c-1. What is the present value of the future cash flows, if you also could earn $210,000 per year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) c-2. Is the property investment attractive to you now? yes or noYou can buy property today for $3 million and sell it in 5 years for $4 million. (You earn no rental income on the property.) a. If the interest rate is 8%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. What is the present value of the future cash flows, if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)Using a financial calculator, You can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.) If the interest rate is 11%, what is the present value of the sales price?
- f you think you can sell an asset for $15,000 in eight (8) years and you think the appropriate discount rate is 5%, how much would you be willing to pay for the asset today? Select one: a. $15,000 b. $10,153 c. $11,236 d. $15,771.00 e. None of the above4. You have an opportunity to purchase a piece of vacant land for $30,000 cash. If you plan to hold it for 15 years and then sell it at a profit. During this period, you would have to pay annual property taxes of $600 and have no income from the property. Assuming that you would want a 10% rate of return from the investment, a) Draw a cashflow diagram. b) What net price would you have to sell it in the next 15 years?You are analyzing a property that popped up on CREXI. Real estate taxes and management services cost 42,362 and 31,563, respectfully. Other expenses are 15,369. If your company’s required return is 10%, what must the average annual rent be over the next five years for you to purchase the property at $400,000 and obtain that 10%? Expenses grow at 2.5% per year. A. 189,500 B. 198,400 C. 201,300 D. 192,700 E. 209,500
- You are considering investing in a rental property. Market rent for similar properties is 1, 500 a month (18,000 a year). Maintenance costs, property tax and insurance add up to 4, 000 a year. You expect rent and cost to increase at 5% a year. You plan to hold the property for 10 years and expect to sell it at the end of 10 years for $250,000. How much should you pay for it now if you're asking for a return of 15% ?Question 13 options: $152, 134.01 $132, 058.94 $169, 321.37 $145, 426.885. Suppose you are considering purchasing a machine or leasing one. The machine has a full economic life of 15 years, and is depreciated linearly to zero. There is no salvage value. For the same machine, you can buy it for $200,000, or lease it for $13,942 per year. Assume a tax rate of 27% and an after-tax cost of debt of 13%. Show work for all parts requiring computation. What is the after-tax lease payment (annual)? What is the depreciation tax shield (annual)? What is the incremental cash flow in absolute value (annual)? What is the net advantage to leasing? Should you lease or buy the machine? Why?You can buy a piece of vacant land for $40,000 cash. You plan to hold it for 20 years and then sell it at a profit. During this period, you would pay annual property taxes of $815. You would have no income from the property. (a) Assuming that you want an 8% rate of return, at what net price would you have to sell the land 20 years hence? (b) What is open space conservation and why is it important? What options would you have in selling your property with this in mind?