Assume there are two plots of vineyard land, X and Y. If X costs twice as...

Assume there are two plots of vineyard land, X and Y. If X costs twice as much as Y and rents and discount rates are the same for each plot, the price difference can only be causes by different growth rates.
a) For both plots, provide an abstract equation for the growth rate g. Assume that plot Y’s price is NPV.

b) Based on your answer to (a), and assuming that the price-to-rent ratio for plot Y equals 12 and i=0.06 , what are the respective growth rates?

Expert Solution

Rahul Sunny answered 6 months ago

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