You have entered into an agreement for the purchase of land. The agreement specifies that you will take ownership of the land immediately. You have agreed to pay $55,000 today and another $55,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 3 %, (b) 5%, or (c) 7%. Note: Use tables, Excel, or a financial calculator. Do not round your intermediate values. Round your answers to 2 decimal places. (FV of $1. PV of $1. FVA of $1, and PVA of $1) Answer is complete but not entirely correct. Compounding Period Due Payment Interest Amount Total Cost of Rate Land Today a. $ 55,000 3% Annually 3 years S 155,573.62 b. 55,000 5% Annually 3 years 238,121.22 C. 55,000 7% Annually 3 3y years 296.410.920
You have entered into an agreement for the purchase of land. The agreement specifies that you will take ownership of the land immediately. You have agreed to pay $55,000 today and another $55,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 3 %, (b) 5%, or (c) 7%. Note: Use tables, Excel, or a financial calculator. Do not round your intermediate values. Round your answers to 2 decimal places. (FV of $1. PV of $1. FVA of $1, and PVA of $1) Answer is complete but not entirely correct. Compounding Period Due Payment Interest Amount Total Cost of Rate Land Today a. $ 55,000 3% Annually 3 years S 155,573.62 b. 55,000 5% Annually 3 years 238,121.22 C. 55,000 7% Annually 3 3y years 296.410.920
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:You have entered into an agreement for the purchase of land. The agreement specifies that you will take
ownership of the land immediately. You have agreed to pay $55,000 today and another $55,000 in three
years. Calculate the total cost of the land today, assuming a discount rate of (a) 3 %, (b) 5%, or (c) 7%.
Note: Use tables, Excel, or a financial calculator. Do not round your intermediate values. Round your
answers to 2 decimal places. (FV of $1. PV of $1. FVA of $1, and PVA of $1)
Answer is complete but not entirely correct.
Compounding
Period
Due
Payment Interest
Amount
Total Cost of
Rate
Land Today
a.
$ 55,000
3%
Annually
3 years
S
155,573.62
b.
55,000
5%
Annually
3 years
238,121.22
C.
55,000
7%
Annually
3
3y
years
296.410.920
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