Cash paid = $75,000
Par value of note = $1,000,000
Note is payable after 5 years
Interest rate = 3%
Present value factor (3%, 5) = 0.8638
Present value of note = Par value of note x Present value factor (3%, 5)
= 1,000,000 x 0.8638
= $863,800
Cost of land = Cash paid + Present value of note
= 75,000 + 863,800
= $938,800
Correct option is (a)
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