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An individual investor is evaluating the profitability of an anticipated land investment that has an asking price of $5,000 per acre and a current net

An individual investor is evaluating the profitability of an anticipated land investment that has an asking price of $5,000 per acre and a current net cash flow of $200 per acre. The investor will pay cash, plans on holding the investment for 10 years, and has a 5% real cost of capital. The anticipated inflation rate is 4%. Net cash flows and land values grow 4% annually, respectively. The investors tax rate on ordinary income is 20%. The capital gain tax rate is 15%. The planning horizon is 20 years. Evaluate the profitability of the investment.

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