You can buy property today for $2.5 million and sell it in 4 years for $3.5 million.
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Question:
You can buy property today for $2.5 million and sell it in 4 years for $3.5 million. (You earn no rental income on the property.)
a. If the interest rate is 8.75%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) Present value $ million
b. Is the property investment attractive to you? No Yes
c-1. What is the present value of the sales price, if you also could earn $150,000 per year rent on the property? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) Present value $ million
c-2. Is the property investment attractive to you? Yes No
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