1. You can buy property today for $2.0 million and sell it in 4 years...
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Finance
1. 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.)
Present value
$ million
b.
Is the property investment attractive to you?
Yes
No
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.)
Present value
$ million
c-2.
Is the property investment attractive to you now?
Yes
No
2. A factory costs $674,960. You forecast that it will produce cash inflows of $492,148 in year 1, $85,000 in year 2, and $160,000 in year 3. The discount rate is 18.50%.
a. Calculate the PV of cash inflows. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $
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