An investor anticipates that land values for a site will be worth $150,000 in five years. Assume real estate taxes are expected to be $2,000 each year (paid at the end of each year) for the next five years and the investor can rent the parcel for $2,400 per year to a billboard company (also paid at the end of each year). How much can the investor pay today for the site and still earn a 15 percent annual return on his investment?

An investor anticipates that land values for a site will be worth $150,000 in five years. Assume real estate taxes are expected to be $2,000 each year (paid at the end of each year) for the next five years and the investor can rent the parcel for $2,400 per year to a billboard company (also paid at the end of each year). How much can the investor pay today for the site and still earn a 15 percent annual return on his investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 5P

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