Chris invested $300K to buy a farmland. The expected yearly revenue is assessed as $67K if farmland remain productive for 10 years. The maintenance and operating costs expected to be $3k/year with an $600 yearly increase. What is the rate of return if the selling value of the farmland after 10year is $20K?
Chris invested $300K to buy a farmland. The expected yearly revenue is assessed as $67K if farmland remain productive for 10 years. The maintenance and operating costs expected to be $3k/year with an $600 yearly increase. What is the rate of return if the selling value of the farmland after 10year is $20K?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 22P
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Chris invested $300K to buy a farmland. The expected yearly revenue is assessed as $67K if farmland remain productive for 10 years. The maintenance and operating costs expected to be $3k/year with an $600 yearly increase. What is the
Hint : try for i=15% and i=18% for the interpolation.
Expert Solution
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Step 1
Internal rate of return is the rate of return where present value of cash inflows is equal to initial investment.
Thus , it is rate of return , where NPV is equal to zero.
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