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13. (3 points Acme is considering developing an office building and selling it in the future. They forecast: At te0 it will cost them $200,000
13. (3 points Acme is considering developing an office building and selling it in the future. They forecast: At te0 it will cost them $200,000 to buy the land At t-1 it will cost them $300,000 to develop At t-2 it will cost them $500,000 to develop At t-3 they will sell it for $4,000,000 Note: each time period is a year Write out the Net Present Value formula for this investment for a general annual discount rate r. Plug all of the numbers you can into the formula. Write down your answer on the ANSWERS page. 14. (3 points) Bob is considering buying a home and selling it in one year. At t-0 he buys a house, the price is $100,000 At t 1 the the house appreciates by 20%, and Bob sells it immediately after that. Buying transaction costs (at t-o) are 5% of price, and selling transaction costs (at t 1) are 8% of price. Note: each time period is a year Write out the Net Present Value formula for this investment for a general annual discount rate r. Plug all of the numbers you can into the formula. Subtract costs from revenues, so that you have one CF for each period in your final answer. Write down your answer on the ANSWERS page
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