1. A trout ranch is now for sale for $40,000. Annual property taxes, maintenance, supplies, and so on are estimated to continue to be $3,000 per year. Revenues from the ranch are expected to be $10,000 next year and then to decline $500 per year thereafter through the tenth year. If you bought the ranch, you would plan to keep it for only five years and at that time to sell it for the value of the land, which is $15,000. If you desired annual rate of return is 12%, should you become a trout rancher? Use the PW method.

1. A trout ranch is now for sale for $40,000. Annual property taxes, maintenance, supplies, and so on are estimated to continue to be $3,000 per year. Revenues from the ranch are expected to be $10,000 next year and then to decline $500 per year thereafter through the tenth year. If you bought the ranch, you would plan to keep it for only five years and at that time to sell it for the value of the land, which is $15,000. If you desired annual rate of return is 12%, should you become a trout rancher? Use the PW method.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1.
A trout ranch is now for sale for $40,000. Annual property taxes, maintenance,
supplies, and so on are estimated to continue to be $3,000 per year. Revenues
from the ranch are expected to be $10,000 next year and then to decline $500
per year thereafter through the tenth year. If you bought the ranch, you would
plan to keep it for only five years and at that time to sell it for the value of the
land, which is $15,000. If you desired annual rate of return is 12%, should you
become a trout rancher? Use the PW method.

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