Question
In: Finance
The owner of a development site is considering an offer from a parking lot operator to...
The owner of a development site is considering an offer from a parking lot operator to rent the parcel for the next five years, while the development is being planned and approved. The operator has offered to pay $65,000 today or an annuity of $20,000 at the end of each of the next 5 years. Which payment method should the site owner accept if her required rate of return is 15 percent?
Solutions
Expert Solution
| We have to compute the present value of both the option and accept the one which is higher | ||||||||||||||
| Option 1 | 65,000 today | |||||||||||||
| Present value = | 65000 | |||||||||||||
| Option 2 | annuity of $20,000 at the end of each of the next 5 years | |||||||||||||
| year | Cash flow | PVIF @ 15% | prenset value | |||||||||||
| 1 | 20000 | 0.8696 | 17,391.30 | |||||||||||
| 2 | 20000 | 0.7561 | 15,122.87 | |||||||||||
| 3 | 20000 | 0.6575 | 13,150.32 | |||||||||||
| 4 | 20000 | 0.5718 | 11,435.06 | |||||||||||
| 5 | 20000 | 0.4972 | 9,943.53 | |||||||||||
| 67,043.10 | ||||||||||||||
| present value = | 67,043.10 | |||||||||||||
| since present value in option 2 is higher therefore we should accept the "annuity of $20,000 at the end of each of the next 5 years" Payment method. | ||||||||||||||
jeff jeffy answered 1 year agoRelated Solutions
Al finds an expensive watch as he is walking from the parking lot into school. The...
Al finds an expensive watch as he is walking from the parking
lot into school. The clasp looks broken, so he takes it to a
jeweler to have it appraised. While pretending to look at the
clasp, the jeweler’s employee removes one of the gem stones
surrounding the watch face and steals it.
(a) If Al sues the jeweler and the jeweler’s employee for theft,
will he succeed? If Tim, the true owner, sees Al in the jewelry
store and...
When parking a car in a downtown parking lot, drivers pay according to the number of...
When parking a car in a downtown parking lot, drivers pay
according to the number of hours or fraction thereof. The
probability distribution of the number of hours cars are parked has
been estimated as follows:
X
1
2
3
4
5
6
7
8
P(X)
0.224
0.142
0.106
0.08
0.057
0.039
0.033
0.319
A. Mean =
B. Standard Deviation =
The cost of parking is 2.25 dollars per hour. Calculate the mean
and standard deviation of the amount of...
Sharon parked her automobile in a parking lot owned by the Parking Corporation. At the request...
Sharon parked her automobile in a parking lot owned by the
Parking Corporation. At the request of the parking lot attendant,
she left her keys at the attendant's office and received a numbered
ticket as her receipt for the payment of the parking fee. The
ticket had the following words written on the back: “Rental of
space only. Not responsible for loss or damage to car or contents
however caused.” A 50 cm. Square sign on the side of the...
2. When parking a car in a downtown parking lot, drivers pay according to the number...
2. When parking a car in a downtown parking lot, drivers pay
according to the number of hours or parts thereof. The probability
distribution of the number of hours that cars are parked has been
estimated as follows:
X
1
2
3
4
5
6
7 8
P(X)
.24 .18
.13 .10
.07 .04
.04 .20
a. Find the mean and standard deviation of the number of hours
that cars are parked in the lot.
b. If the cost of...
Last week, 108 cars received parking violations in the green parking lot. Of these, 27 had...
Last week, 108 cars received parking violations in the green
parking lot. Of these, 27 had unpaid parking tickets from a
previous violation. Assuming that last week was a random sample of
all parking violators, find the width of the 90 percent confidence
interval for the percentage (correct to four decimal places) of
parking violators that have prior unpaid parking tickets.
The owner of Pitt Fitness is considering whether to consolidate his clubs and offer classes in
The owner of Pitt Fitness is considering whether to consolidate his clubs and offer classes in only one location to ensure profitability. To explore his question, what query or queries would you create to answer this business strategy question?
The parking lot of a shopping center is square of sides a, delimited by sills of...
The parking lot of a shopping center is square of sides a,
delimited by sills of height h, and the entrance to the parking lot
is width c. During the last rain it was flooded, and the only
escape route was entrance c. To avoid future flooding, it is
necessary to determine the time t in which the water takes to
evacuate from the enclosure. For the effect, a 1: 100 scale model
is used and it is observed that...
To a parking lot of a commercial plaza on a weekend day, an average of 40...
To a parking lot of a commercial plaza on a weekend day, an
average of 40 vehicles arrive per hour.
a) What is the probability that the time between the arrival of
cars that arrive one after the other (consecutive) is between 6 and
12 minutes?
b) What is the probability that the time between the arrival of
cars arriving one after the other (consecutive) is greater than the
average by one standard deviation?
c) What is the probability that...
The parking lot of a shopping center is square of sides a, delimited by sills of...
The parking lot of a shopping center is square of
sides a, delimited by sills of height h, and the entrance to the
parking lot is width c. During the last rain it was flooded, and
the only escape route was entrance c. To avoid future flooding, it
is necessary to determine the time t in which the water takes to
evacuate from the enclosure. For the effect, a 1: 100 scale model
is used and it is observed that...
The pavement in a new parking lot is expected to require no maintenance for the first...
The pavement in a new parking lot is expected to require no
maintenance for the first two years of its life. At EOY3, the first
resurfacing will have to be made costing $50,000. Every two years
thereafter, the lot will need resurfacing. However, the cost for
each resurfacing is expected to increase by 3% from the time
before. The useful life of the parking lot is 26 years and no
maintenance occurs in year 26.
a. What is the present...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- What are the options that might be considered in relation to introducing flexible work practices? What...
- Question 2 : Aggregate Scores: Write a program that opens 2 files, quiz.txt, and hw.txt. The...
- Define the term symbiosis specifically as it applies in a biological context. Compare and contrast parasitism,...
- A research team conducted a study showing that approximately 20% of all businessmen who wear ties...
- Research the internet for companies that have executed data science projects. Pick one company and describe...
- Explain two theories or frameworks for understanding how Western Europe emerged out of 1,000 years of...
- Two cannons are mounted as shown in the drawing and rigged to fire simultaneously. They are...
ADVERTISEMENT