I IC L LTI, W1 | U e LY TS iiLa 1. Homesteading: Assume the present total value of developing land on the frontier is given by: V(t)=10 _19 )= 5 b a. Solve for the time farming will begin under a land auction, ty. b. Given the result from part (a) and a discount rate, v = .12, solve for, ty, the date of arrival by squatters, who bear a cost, = 6, but do not need to begin farming until , tf to secure rights. Just set up equation, you do not need to calculate answer. c. Solve for the time when homesteading will begin, , assuming farming must begin at , to secure property rights and the same upfront cost (C = 6). 2. Capitalization: There are three parcels for sale: Parcel 1: Expected profits of $10,000 per year forever. Property tax rate of 1% of land value per year. Parcel 2: Expected profits of $9,000 per year forever. Has a property tax exemption. Parcel 3. Expected profit of 520,000 per year, pays 1% property tax, but land title is insecure and 50 the investment is riskier. Calculate the value of parcel 1 using a 9% discount rate. Calculate the value of parcel 2 using a 9% discount rate. Calculate the value of parcel 3 using a2 19% discount rate. What does the land market tell us about the value of these three parcels? o0 oo