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4 years ago

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.)

Business

1 answer:

Luden [163]4 years ago

4 0

a. Rate of interest : 8%

Today’s Price = $3,000,000

Price after 5 years = $4,000,000

Present Value of price after 5 years = $4,000,000 / (1+0.08)^5

= $2,722,333.88

b. The property is not worth investing, since investing in the land is $3,000,000 while it can be sold today as $2,722,333, thus not a profitable investment as it will incur a loss of $277,667 ($3,000,000 - $4,000,000).

c. Present value of rent of 5 Years = $200,000*PVIFA(8%,5)

= $200,000*3.99999

= $798,542.01

d. NET PRESENT VALUE OF INVESTMENT = PRESENT VALUE OF FUTURE CASH FLOWS – INITIAL INVESEMTENT

NET PRESENT VALUE = $2,722,333.88 + $798,542.01 - $3,000,000

NET PRESENT VALUE = $520,874.80

Since the Net Present value is positive, it is worth investing in the land.

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False Value Hardware began 2018 with a credit balance of $23,000 in the allowance for sales returns account (i.e., the estimated

defon

Answer:

balance in sales returns account = $18200

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given data

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to find out

balance in the allowance for sales returns account

solution

we get here estimates for returns that is

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