Question
A farmer plans on selling the land in 5 years. He thinks the real land value will be $100 in 5 years. Suppose that the
A farmer plans on selling the land in 5 years. He thinks the real land value will be $100 in 5 years. Suppose that the marginal tax rate is 39% and the inflation rate is 5%.
(i) Calculate the nominal terminal value.
| a. | $77.85 | b. | $139.00 | |
| c. | $105.00 | d. | $127.63 |
e. None of the answers are correct
(ii) Calculate the after-tax terminal value.
| a. | $86.49 | b. | $116.85 | |
| c. | $123.79 | d. | $103.05 |
e. None of the answers are correct
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Intermediate Financial Theory
Authors: Jean-Pierre Danthine, John B. Donaldson
2nd Edition
0123693802, 978-0123693808
