Question
In: Accounting
Mr. Goldman has owned a plot of vacant land as an investment for six years. The...
Mr. Goldman has owned a plot of vacant land as an investment for six years. The land has a basis of $600,000. Mr. Goldman is now considering disposing of the land. A buyer has offered Mr. Goldman the opportunity to engage in a qualified § 1031 like-kind exchange in which the buyer will give Mr. Goldman a different piece of land with a fair market value of $725,000 plus $20,000 cash in the current year. If Mr. Goldman accepts the buyer’s offer, he expects to hold the new land for two years at which time he expects to sell the new land for $830,000. Any recognized gains on the above transactions would be taxed at Mr. Goldman’s long-term capital gains tax rate of 15%. Mr. Goldman uses a discount rate of 7% in his NPV calculations. Calculate the total NPV of Mr. Goldman’s post-tax cash flows from his exchange and subsequent sale of land.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Consider a firm whose only asset is a plot of vacant land, and whose only liability...
Consider a firm whose only asset is a plot of vacant land, and
whose only liability is debt of $15 million due in one year. If
left vacant, the land will be worth $10 million in one year.
Alternatively, the firm can develop the land at an upfront cost of
$20 million. The developed land will be worth $35 million in one
year. Suppose the risk-free interest rate is 10%, assume all cash
flows are risk-free, and assume there are...
Consider a firm whose only asset is a plot of vacant land, and whose only liability...
Consider a firm whose only asset is a plot of vacant land, and
whose only liability is debt of $15.4 million due in one year. If
left vacant, the land will be worth $10.1 million in one year.
Alternatively, the firm can develop the land at an up-front cost
of $19.8 million. The developed the land will be worth $35.1
million in one year. Suppose the risk-free interest rate is 9.8%,
cash flows are risk-free, and there are no taxes....
Consider a firm whose only asset is a plot of vacant land, and whose only liability...
Consider a firm whose only asset is a plot of vacant land, and
whose only liability is debt of $ 14.6 million due in one year. If
left vacant, the land will be worth $ 9.6 million in one year.
Alternatively, the firm can develop the land at an up-front cost
of $ 20.3 million. The developed the land will be worth $ 34.4
million in one year. Suppose therisk-free interest rate is 9.7 %
cash flows are risk-free, and...
Consider a firm whose only asset is a plot of vacant land, and whose only liability...
Consider a firm whose only asset is a plot of vacant land, and
whose only liability is debt of $ 14.8 million due in one year. If
left vacant, the land will be worth $ 10.3 million in one year.
Alternatively, the firm can develop the land at an up-front cost
of $ 20.4 million. The developed the land will be worth $ 35
million in one year. Suppose the risk-free interest rate is 9.7
%, cash flows are risk-free,...
I-Consider a firm whose only asset is a plot of vacant land, and whose only liability...
I-Consider a firm whose only asset is a plot of vacant land,
and whose only liability is debt of $ 14.5 million due in one year.
If left vacant, the land will be worth $ 10.5 million in one
year. Alternatively, the firm can develop the land at an upfront
cost of $ 19.5 million. The developed land will be worth $ 34.1
million in one year. Suppose the risk-free interest rate is 9.7 %
, assume all cash flows...
An investor is analyzing two parcels of vacant land to determine which is a better investment...
An investor is analyzing two parcels of vacant land to
determine which is a better investment to purchase and hold for
future appreciation in value: The following are the analysis
assumptions for the two parcels.
Parcel
A
Parcel B
Purchase
price
100,000
150,000
Carrying cost per
year
1,500
2,200
Projected sale
price
180,000
300,000
Anticipated Holding
period 5
years
7 years
What is the
projected IRR for each of the parcels?
Using this information from the previous question, what...
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During 2018, your clients, Mr. and Mrs. Howell, owned the following investment assets: Investment Assets Date...
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Investment Assets
Date Acquired
Purchase Price
Broker’s Commission Paid at Time of
Purchase
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$100
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An investment project costs $18,900 and has annual cash flows of $3,700 for six years. ...
An investment project costs $18,900 and has annual cash flows
of $3,700 for six years.
Required :
(a)
What is the discounted payback period if the discount rate is
zero percent?
(b)
What is the discounted payback period if the discount rate is 4
percent?
(c)
What is the discounted payback period if the discount rate is
22 percent?
An investment project costs $10,000 and has annual cash flows of $2,850 for six years. ...
An investment project costs $10,000 and has annual cash flows of
$2,850 for six years.
a.
What is the discounted payback period if the discount rate is
zero percent? (Enter 0 if the project never pays back. Do
not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.)
b.
What is the discounted payback period if the discount rate is 5
percent? (Enter 0 if the project never pays back. Do not
round intermediate calculations...
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