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A farmer has recently bought a land for $2,000.00 and planned on selling the land in 8 years. The real price of land is expected to increase at 2% each year. Suppose that the inflation rate is 14% and the marginal tax rate is 11%.

(i) Calculate the real land price.

a.         $1,526.11                   b.         $2,034.81

c.          $2,484.87                   d.       $2,343.32

e. None of the answers are correct

(ii) Calculate the before-tax nominal terminal value.

a.         $2,343.32                   b.      $6,684.52

c.          $2,015.25                   d.        $2,085.55

e. None of the answers are correct

(iii) Calculate the after-tax-nominal terminal value.

a.        $6,169.22                   b.        $1,828.02

c.          $5,490.61                   d.        $5,949.22

e. None of the answers are correct

Financial Management, Finance

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