6. You are partner in a venture that is considering leasing a vacant lot owned by the...
Question:
6. You are partner in a venture that is considering leasing a vacant lot owned by the city of Hartford. In five years the city is considering constructing a convention center there. In the meantime our partnership could pave the lot, construct a shack, and charge for parking. At the end of five years you would have to remove the pavement and the shack. Given the cash flows below, what is the maximum (in theory) that you would pay for the lease? Assume that the your partnership's cost of funds is 12% compounded annually. 2 Year Cash Flow 0 ($22,000) 1 $8,000 2 $8,000 3 $8,000 4 $8,000 5 (2,000) $1,163.94
7. Referring to the previous question, now that you know that you can make a profit, you are curious to know the maximum interest rate that you could pay on a bank loan to finance this project and exactly breakeven. 14.63%
8. I can put $300 once per month in my 401-K plan that earns 10% compounded monthly. How much will I have at the end of 40 years if I make my contributions at the end of the month? $1,897,224
Introduction to Governmental and Not for Profit Accounting
ISBN: 978-0132776011
7th edition
Authors: Martin Ives, Terry K. Patton, Suesan R. Patton