Property taxes in a particular district are 2% of the purchase price every year. If you just purchased a $150,000 home, what

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3 years ago

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Property taxes in a particular district are 2% of the purchase price every year. If you just purchased a $150,000 home, what

is the present value of all the future property tax payments? Assume that the house remains worth $150,000 forever, property tax rates never change, and that a 4% interest rate is used for discounting. The present value of all the future property tax payments is

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1 answer:

baherus [9] · Answer 1 · 2022-07-02T06:45:37+03:00

Answer:

the present value of the property taxes is 75,000

Explanation:

We can determinate the present value of all the future payment using the perpetuity formula:

150,000 x 2% = 3,000 property taxes per year as this will be paid indefinitely and the cash flow are equal; it is a perpetuity.

C/r = PV

3,000 / 0.04 = PV = 75,000

Property taxes in a particular district are 2​% of the purchase price every year. If you just purchased a ​$150,000 ​home, what

Property taxes in a particular district are 2% of the purchase price every year. If you just purchased a $150,000 home, what