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 $51,000 today and another $51,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 2%, (b) 4%, or (c) 6% .

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 $51,000 today and another $51,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 2%, (b) 4%, or (c) 6% .

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 16DQ

See similar textbooks

Similar questions

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 $35,000 today and another $35,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 3%, (b) 5%, or (c) 7%. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.) a. b. C Payment Amount $ 35,000 35,000 35,000 Interest Rate 3% 5% 7% Compounding Annually Annually Annually Period Due 3 years 3 years 3 years Total Cost of Land Today
Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales- commission selling price for the property is $450,000. You are willing to finance this transaction over a 14-year period and have told the buyer that you expect a 11% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn a 11% return, if payments are received from the purchaser: NOTE: to answer the above questions, use the PMT function in Excel, as follows: PMT(rate,nper, pv,fv,type) where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (i.e., the total amount that a series of future payments is worth now; also known as the principal), fv is the future value (or a cash balance you want to attain after the last payment is made; if fv is omitted, it is assumed to be 0 (zero)), and type is…
An owner can lease her building for 100,000 per year for three years.aThe explicit cost of maintaining the building is cost 35,000 and the implicit cost is 50,000.All revenue are received and cost are borne at the end of each year.If the interest rate is 4 percent,determine the present value of the stream of: (I) accounting profit(II) ecenomic profits
Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales-commission selling price for the property is $500,000. You are willing to finance this transaction over a 20-year period and have told the buyer that you expect a 12% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn a 12% return, if payments are received from the purchaser: NOTE: to answer the above questions, use the PMT function in Excel, as follows: PMT(rate,nper,pv,fv,type) where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (i.e., the total amount that a series of future payments is worth now; also known as the principal), fv is the future value (or a cash balance you want to attain after the last payment is made; if fv is omitted, it is assumed to be 0 (zero)), and…
An owner can lease her building for $150,000 per year for three years. The explicit cost of maintaining the building is $50,000, and the implicit cost is $65,000. All revenues are received, and costs borne, at the end of each year. If the interest rate is 6 percent, determine the present value of the stream of: Instructions: Do not round intermediate calculations. Round your final calculation to two decimal places. a. Accounting profits. $ b. Economic profits. $
An owner can lease her building for $160,000 per year for three years. The explicit cost of maintaining the building is $55,000, and the implicit cost is $70,000. All revenues are received, and costs borne, at the end of each year. If the interest rate is 5 percent, determine the present value of the stream of: Instructions: Do not round intermediate calculations. Round your final calculation to two decimal places. a. Accounting profits. $ b. Economic profits. $ 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.
Consider an asset that you purchase for $183.836. Its nominal resale value after 3 years of ownership is $16,948. At that time you plan to sell it and invest the proceeds elsewhere. What is the net present cost to you of holding this asset if the nominal discount raM is 6%?
You have some property for sale and have received two offers. The first offer is for $89,500 today in cash. The second offer is the payment of $35,000 today and an additional guaranteed $70,000 two years from today. If the applicable discount rate is 11.5 percent, which offer should you accept and why?
You are given the task to evaluate the value of a rental property. You identified similar properties and calculated average cap rate is 15%. You estimated the property's Net operating Income to be $570,000. What is the maximum price you would pay for the property? Group of answer choices $3.5 million $655,000 $3.8 million $5.7 million
The capital cost of a property is $5900000. A CCA rate of 20% is applied. The tax rate is 30%.Take five years of depreciation. Ifthe propertyis sold after five years for $1990000 what is theDisposal Tax Effect?Note: Please enter your answer to two decimal PlacesAnswer
An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for $200,800 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Inspection Title search Renovation Landscaping Loan interest Insurance Property taxes Selling expenses Required: a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity. b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, he would have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year 2 in order…
Assume that you are planning to buy a property producing natural resources. You think you will keep the property for the next 23 years. You plan to spend $700 per acre. You will have incurred costs of $11 per acre for the 23 years prior to selling the property. You believe that you will receive $26/acre/year in revenue during the investment period. What price (at time of the future sale) will you need to get for the property under 2 MAR scenarios. (using both 5.8% and 8% as MAR).