You can buy property today for $3 million and sell it in 5 years for $4 million.

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You can buy property today for $3 million and sell it in 5 years for $4 million. (You earn no rental income on the property.)

a. If the interest rate is 8%, what is the present value of the sales price?

b. Is the property investment attractive to you?

c. Would your answer to (b) change if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year.

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Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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Question Posted: Jun 30, 2016 09:09 AM

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You can buy property today for $3 million and sell it in 5 years for $4 million.

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Fundamentals of Corporate Finance

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