Mr agirich has the opportunity to purchase some farm land, Ask an Expert

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Mr. Agirich has the opportunity to purchase some farm land at $2000/acre. He expects that real land prices will increase at 4% per year and inflation will be 3%. His pretax adjusted discount rate is 14%. Assume that the land will be sold in 10 years and the marginal tax rate is 23%. The effective interest rate on land loans is 5%.

Calculate the after tax risk adjusted discount rate.

Calculate the present value of the after tax terminal value.

What is the approximate maximum bid price for this land?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92077835

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