Business, 30.07.2021 03:00 jayjay7773

Mr. Agirich has the opportunity to purchase some farm land at $3,000/acre. He expects that real land prices will increase at 5% per year and inflation will be 2%. His pretax risk adjusted discount rate is 14%. Assume that the land will be sold in 10 years and the marginal tax rate is 23%. The effective interest rate on land loans is 6%. (i) Calculate the after-tax risk adjusted discount rate.
a. 14%
b. 10.7%
c. 6%
d. 4.6%
e. None of the answers are correct
Enter Response Here:
(ii) Calculate the real price of land in 10 years.
a. $3,657
b. $8,291
c. $4,887
d. $5,373
e. None of the answers are correct
Enter Response Here:
(iii) Calculate the nominal price of land in 10 years.
a. $4,458
b. $6,550
c. $10,019
d. $5,957
e. None of the answers are correct
Enter Response Here:
(iv) Calculate the after-tax terminal value of the land.
a. $5,957
b. $5,277
c. $4,887
d. $3,000
e. None of the answers are correct
Enter Response Here:
(v) Calculate the Present Value of the after-tax terminal value.
a. $2,140
b. $1,756
c. $1,896
d. $1,077
e. None of the answers are correct
Enter Response Here:
(vi) What is the approximate maximum bid price for this land?
a. $5,140
b. $4,756
c. $4,077
d. $4,896
e. None of the answers are correct

Answers: 3

Show answers

Another question on Business

Business, 22.06.2019 16:20

Suppose you hold a portfolio consisting of a $10,000 investment in each of 8 different common stocks. the portfolio's beta is 1.25. now suppose you decided to sell one of your stocks that has a beta of 1.00 and to use the proceeds to buy a replacement stock with a beta of 1.55. what would the portfolio's new beta be? do not round your intermediate calculations.

Answers: 2

Answer

Business, 22.06.2019 21:00

Ryan terlecki organized a new internet company, capuniverse, inc. the company specializes in baseball-type caps with logos printed on them. ryan, who is never without a cap, believes that his target market is college and high school students. you have been hired to record the transactions occurring in the first two weeks of operations.

Answers: 1

Answer

Business, 23.06.2019 00:30

In a recent annual report, apple computer reported the following in one of its disclosure notes: "warranty expense: the company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." this note exemplifies apple's use of: (a) conservatism.(b) matching. (c) realization principle. (d) economic entity.

Answers: 2

Answer

Business, 23.06.2019 02:00

Which of the following is the best example of substitution? a. movie producers begin making more comedies because they cost less to make than action films. b. people walk out before the end of a movie because the acting and the plot are terrible. c. people at the movie theater switch from popcorn to candy because popcorn has gotten too expensive. d. more people begin going to matinee movies instead of night movies to save money on the tickets.

Answers: 2

Answer

You know the right answer?

Mr. Agirich has the opportunity to purchase some farm land at $3,000/acre. He expects that real land...

Questions