**Problem 5-11 Present Values (LO2)**You can buy a property today for $3 million and sell it in 5 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? *Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.***b.** Is the property investment attractive to you?**c-1.** What is the present value of the future cash flows if you could also earn $200,000 per year rent on the property? The rent is paid at the end of each year. *Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.***c-2.** Is the property investment attractive to you now?---**Table Explanation:**- **a. Present value** - Calculated present value: $2,722,332.788 (in millions, rounded to 3 decimal places the answer should be $2.722) - Correctness: Incorrect- **b. Is the property investment attractive to you?** - Answer: No - Correctness: Correct- **c-1. Present value** - Calculated present value: $798,542.007 (in millions, rounded to 3 decimal places the answer should be $0.799) - Correctness: Incorrect- **c-2. Is the property investment attractive to you now?** - Answer: Yes - Correctness: Correct**Note:** The user's calculations for present value are incorrect based on the requirement for rounding in millions to three decimal places, indicated by the crosses next to the calculated values.

Information Provided: Interest rate = 8% Purchase price = $3 million Selling price = $4 million

a. If the interest rate is 8%, what is the present value of the sales price? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? c-1. What is the present value of the future cash flows if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. c-2. Is the property investment attractive to you now?

a. If the interest rate is 8%, what is the present value of the sales price? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? c-1. What is the present value of the future cash flows if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. c-2. Is the property investment attractive to you now?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

(Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment B A $ 1,000 2,000 3,000 (4,000) 1,000 4,000 3,000 (Click on the icon in order to copy its contents into a spreadsheet.) What is the present value of each of these three investments if the appropriate discount rate is 9 percent? $ End of Year 1 SA NM CO 2 3 4 5 $ 1,000 1,000 1,000 C $ 5,000 a. What is the present value of investment A at an annual discount rate of 9 percent? (Round to the nearest cent.) b. What is the present value of investment B at an annual discount rate of 9 percent? (Round to the nearest cent.) c. What is the present value of investment C at an annual discount rate of 9 percent? (Round to the nearest cent.) 5,000 (5,000) (5,000) 15.000
9.)show complete solution, final answer should be in two decimal only, i will automatically give upvote.
If you invest $17,500 today, how much will you have in each of the following instances? Use Appendix A as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. In 7 years at 8 percent? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Future value b. In 18 years at 7 percent? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Future value c. In 25 years at 6 percent? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Future value d. In 20 years at 6 percent (compounded semiannually)? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Future value
Consider the following investment in a piece of land. Purchase price 500,000 Annual maintenance: 5,000 Expected sale price after 8 years: 1,000,000. Determine a) The rate of return (to 1/100 percent) and b) What is the lowest sale price the investor should accept if she wishes to earn a return of 10% after keeping the land for 10 years? Show complete solution pls. No excel computation
c. A person who invests $1, 600 each year finds one choice that is expected to pay 3 percent per year and another choice that may pay 4 percent. What is the difference in return if the investment is made for four years? Round your answer to the nearest dollar. (Hint: Use Appendox A-3 or the Garman/Forgue companion website.) Round Future Value of Series of Equal Amounts in intermediate calculations to four decimal places.
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
What is the no arbitrage price of a risk-free investment that promises to pay $1,000 in one year? The risk-free interest rate is 3.5%. If you can purchase the investment for $950, do you have an arbitrage opportunity?
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely.
Questions: 1. Using simple interest computations, find the future value of $3,620 at 2 38%/2 38% 2. Now, using compound interest computations, find the future value of $3,620 at 2 38%/2 38% Time Value of Money Solver). Show what you put into the calculator for your work. 3. Now, using compound interest computations, find the future value of $3,620 at 2 38%/2 38% Time Value of Money Solver). Show what you put into the calculator for your work. 4. Explain why the future values are different in questions 1-3. Explain who would benefit from more frequent compounding. Who would be at a disadvantage from more frequent compounding.
If you invest $17,500 today, how much will you have in each of the following instances? Use Appendix A as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. In 7 years at 8 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Future value b. In 18 years at 7 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Future value Future value Val HOME c. In 25 years at 6 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) 1 ARNE Inil STA Boll Com te doen Monta Panta BBELL Aaron Alfal amphenie dit ou Munimin is magna. Menin that dimin ilmais mmmmm ana multzal mmmmm
Use a calculator to evaluate the amortization formula for the values of the variables P, r, and t (respectively). Assume n = 12. (Round your answer to the nearest cent.) $150,000; 9%; 25 yr
What is the internal rate of return for this rental condominium investment?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS