Problem # 45: In the center of a big city, the rent for a plot of land has a rental price of $600,000 peryear.a.What is the minimum purchase price the owner will accept for this land if the prevailinginterest rate is at 10% and assuming that it will remain at this rate most of the time?b. If the interest rate is expected to be lower at 5%, how much is the purchase price?

Rental Price = $600,000 per year Interest rate (Part a) = 10% Interest rate (Part b) = 5%

In the center of a big city, the rent for a plot of land has a rental price of $600,000 per What is the minimum purchase price the owner will accept for this land if the prevailing terest rate is at 10% and assuming that it will remain at this rate most of the time? the interest rate is expected to be lower at 5%, how much is the purchase price?

In the center of a big city, the rent for a plot of land has a rental price of $600,000 per What is the minimum purchase price the owner will accept for this land if the prevailing terest rate is at 10% and assuming that it will remain at this rate most of the time? the interest rate is expected to be lower at 5%, how much is the purchase price?

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter2: Using Financial Statements And Budgets

Section: Chapter Questions

Problem 5FPE

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Problem # 45: In the center of a big city, the rent for a plot of land has a rental price of $600,000 per
year.
a.
What is the minimum purchase price the owner will accept for this land if the prevailing
interest rate is at 10% and assuming that it will remain at this rate most of the time?
b. If the interest rate is expected to be lower at 5%, how much is the purchase price?

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Part (a) Calculation of the purchase price of plot is as follow:

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Part (b) Calculation of the purchase price of plot is as follow:

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