Question: 1. A real estate developer has just bought an undeveloped parcel of land for $200,000. Although the real estate market is currently slow, he expects

1. A real estate developer has just bought an undeveloped parcel of land for $200,000. Although the real estate market is currently slow, he expects that the property will be sold in 2 years. If improvements costing $15,330 are made now and the land is sold in 2 years for $275,000, what is its internal rate of return?

2. A small accounting firm is considering the purchase of a computer software package that would reduce the amount of time needed to prepare tax forms. The software costs $1,500. The firm estimates that it will save $750 per year if the software is used.

a. What is the payback on the computer package?

b. The firm may instead buy a more sophisticated computer package for $3,000. Assuming the same $750 annual savings is relevant, what is the payback on this package?

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