Question
The Lucrative Liquidation Co. can purchase two warehouses now, and three more one year from now. Lucrative expects to sell one warehouse per year for
The Lucrative Liquidation Co. can purchase two warehouses now, and three more one year from now. Lucrative expects to sell one warehouse per year for the next 5 years. In terms of today dollars, each warehouse costs $500,000 and will sell for $650,000. The tax rate is 35%.
a. Suppose projected inflation is zero and the OCC is 9%. Calculate the NPV of this project.
b. Now suppose projected inflation is 4% per year and the OCC is 13%. The warehouses purchased now will be the 1st to be sold. Recalculate the NPV.
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Advanced Bond Portfolio Management
Authors: Frank J. Fabozzi, Lionel Martellini, Philippe Priaulet
1st Edition
0471678902, 9780471678908
