Beelzebub is considering purchasing some land. He believes the value of the land will be $600,000...
Beelzebub is considering purchasing some land. He believes the value of the land will be $600,000 in five years. The land is expected to increase in value at an annual rate of 8.5% annually. How much should the red tailed, pitch fork carrying man pay for this land today?
Homework Answers
Present Value= Amount of Cash flow * Present Value of Discounting Factor (Rate , Time)
= $ 600,000 * Present Value of Discounting Factor ( 8.5%,5)
= $ 600,000 * 1/(1.085) ^ 5
= $ 399,027.254
Hence the correct answer is $ 399,027.25
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