Part III)An equipment is up for sale and the price is to be negotiated. A prospective buyerestimates that she could keep the equipment for 5 years and make net profit of $7,000each year by renting it to others. She estimates that she can sell the equipment for $6,000at the end of 5 years. If she wants a return of 7%, what is the maximum price she shouldpay to break even?

In order to evaluate a project for its initial price to be paid, the present value method can be…

Answered: Part III) An equipment is up for sale…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

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You can buy property today for $3.1 million and sell it in 6 years for $4.1 million. (You earn no rental income on the property.) a. If the interest rate is 7%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? yes or no c-1. What is the present value of the future cash flows, if you also could earn $210,000 per year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) c-2. Is the property investment attractive to you now? yes or no
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Using a financial calculator, You can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.) If the interest rate is 11%, what is the present value of the sales price?
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