How much should you pay for land that has an income of $307/acre, annually, if the interest rate is 9.1%?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 4QTD
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How much should you pay for land that has an income of $307/acre, annually, if the interest rate is 9.1%?

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Step 1

Note: Assuming the land is 1 acre, since no information on the land are is given.

Present value of a regular stream of income of $307/acre for an infinite period at a rate of 9.1%, can be calculated as below:

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