June 2019, Greek Consulate in Jerusalem. While sipping cocktails with my friend, Katerina, she shares her...
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June 2019, Greek Consulate in Jerusalem. While sipping cocktails with my friend, Katerina, she shares her future business plan. She wants to use a piece of land that her father owns back in our hometown (Preveza) to build two luxurious villas. The land is next to the sea, thus not very fertile, but can be rented to farmers for a mere $10,000 per year. The total construction cost is $200,000 and she can depreciate half of the cost linearly over the next 10 years. She plans to rent one villa for $24,000 per year and keep the second one so she can move from the apartment she currently rents for $1,000/month. When the 10-year period ends, she is confident that she can sell both villas for $350,000. Her flat tax rate is 20% and the required rate of return of the project is 18%. 1. Should I advice her to take the project? 2. Got your response! But just to be sure, could you calculate the NPV of the project? June 2019, Greek Consulate in Jerusalem. While sipping cocktails with my friend, Katerina, she shares her future business plan. She wants to use a piece of land that her father owns back in our hometown (Preveza) to build two luxurious villas. The land is next to the sea, thus not very fertile, but can be rented to farmers for a mere $10,000 per year. The total construction cost is $200,000 and she can depreciate half of the cost linearly over the next 10 years. She plans to rent one villa for $24,000 per year and keep the second one so she can move from the apartment she currently rents for $1,000/month. When the 10-year period ends, she is confident that she can sell both villas for $350,000. Her flat tax rate is 20% and the required rate of return of the project is 18%. 1. Should I advice her to take the project? 2. Got your response! But just to be sure, could you calculate the NPV of the project?
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Sure lets calculate the Net Present Value NPV of Katerinas project to determine whether its a good i... View the full answer
Related Book For
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
Posted Date:
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