Question
Tom is considering starting up a new business venture 5 years from now. He wants to launch a new corporation Database Marketing Applications (aka DataMaApp)
Tom is considering starting up a new business venture 5 years from now. He wants to launch a new corporation Database Marketing Applications (aka DataMaApp) , selling his Statistical skills to businesses to help maximize their returns on their Marketing initiatives (see DataMaApps website www.datamaapp.com). First, Tom wants to make some money via a sound Real Estate investment. Tom finds a deal where he can buy property today for $3 million and sell it in 5 years for $4 million. If the going interest rate is 8% compounded annually, what is the land worth (present value) today? (5 marks) Should Tom buy it for $3 million dollars? Why or why not? (2 marks) Later, Tom finds out he can rent the property for 200,000 per year and still sell it for $4 million dollars five years from now. Should Tom buy the property if he can rent it and then sell 5 years later? (6 marks) Why or why not? (2 marks)
(If possible) Please answer this question using present/future values annuity and show your work :)
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