Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
9th Edition
ISBN: 9780134143071
Author: PINDYCK, Robert, Rubinfeld, Daniel
Publisher: PEARSON
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Chapter 15, Problem 5RQ
To determine

Best option: Lump sum payment versus smaller annual payments.

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A firm that owns and manages rental properties is considering buying a building that would cost $800,000 this year, but would yield an annual revenue stream of $50,000 per year for the foreseeable future. For what range of interest rates would this purchase increase the present value of the firm?
Suppose you buy a house for $250,000. One year later, the market price for the house has fallen to $200,000. What is the return on your investment in the house if you made a down payment of 10 percent and took out a mortgage loan for the other 90 percent?
Calculate the net present value of a business deal that costs $2,500 today and will return $1,500 at the end of this year and $1,700 at the end of the following year. Use an interest rate of 13%.
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