You can buy property today for $3 million and sell it in five years for $4 million.
(You earn no rental income on the property.)
- a. If the interest rate is 8%, what is the present value of the sales price?
- b. Is the property investment attractive to you?
- c. Would your answer to part (b) change if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year.
Solution:
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