A parcel of land is expected to yield annual rents
A parcel of land is expected to yield annual rents equal to $10,000 per year forever. If the market rate of interest is 10 percent, calculate the market price of the parcel. Suppose you purchase the parcel of land.
After your purchase, a 5 percent property tax on the land is imposed. Calculate the impact of the tax on the market value of the land parcel. Can you avoid the tax by selling the land?
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