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3. A firm paid $160,000 for a building site two years ago. It is now worth $180,000, and the firm's plans have changed so that no building is planned. The firm estimates that the land will be worth $240,000 in four years. If the firm's interest rate is 8%, what should it do? Should it sell the building now or in four years?

3. A firm paid $160,000 for a building site two years ago. It is now worth $180,000, and the firm's plans have changed so that no building is planned. The firm estimates that the land will be worth $240,000 in four years. If the firm's interest rate is 8%, what should it do? Should it sell the building now or in four years?

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter17: Financial Markets
Section: Chapter Questions
Problem 5SCQ: Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is...
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3. A firm paid $160,000 for a building site two years ago. It is now worth $180,000, and the firm's plans have changed so that no building is planned. The firm estimates that the land will be worth $240,000 in four years. If the firm's interest rate is 8%, what should it do? Should it sell the building now or in four years?
Transcribed Image Text:3. A firm paid $160,000 for a building site two years ago. It is now worth $180,000, and the firm's plans have changed so that no building is planned. The firm estimates that the land will be worth $240,000 in four years. If the firm's interest rate is 8%, what should it do? Should it sell the building now or in four years?
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