Question
1. A real estate developer has just bought an undeveloped parcel of land for $200,000. Although the real estate market is currently slow, he expects
1. A real estate developer has just bought an undeveloped parcel of land for $200,000. Although the real estate market is currently slow, he expects that the property will be sold in 2 years. If improvements costing $15,330 are made now and the land is sold in 2 years for $275,000, what is its internal rate of return?
2. A small accounting firm is considering the purchase of a computer software package that would reduce the amount of time needed to prepare tax forms. The software costs $1,500. The firm estimates that it will save $750 per year if the software is used.
a. What is the payback on the computer package?
b. The firm may instead buy a more sophisticated computer package for $3,000. Assuming the same $750 annual savings is relevant, what is the payback on this package?
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South-Western Federal Taxation 2020 Comprehensive
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
43rd Edition
357109147, 978-0357109144
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