ABC bought a piece of land in a highly developing area for a purchase price of P4,000,000. Directly attributable costs incurred was P250,000. If ABC were to resell this land now, it would incur cost to sell of P400,000. The following rates were gathered: Weighted average cost of capital Land average price increase per year 15% 18% Inflation rate 4% What is the net benefit from investing in this property if ABC holds the land for 10 years?
ABC bought a piece of land in a highly developing area for a purchase price of P4,000,000. Directly attributable costs incurred was P250,000. If ABC were to resell this land now, it would incur cost to sell of P400,000. The following rates were gathered: Weighted average cost of capital Land average price increase per year 15% 18% Inflation rate 4% What is the net benefit from investing in this property if ABC holds the land for 10 years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Required: Assuming that ABC plans to sell the asset by the end of the fifth year, compute the following:
4. Cost of illiquidity
5. Intrinsic value
6. Net benefit of buying the asse
Transcribed Image Text:ABC bought a piece of land in a highly developing area for a purchase price of
P4,000,000. Directly attributable costs incurred was P250,000. If ABC were to resell
this land now, it would incur cost to sell of P400,000. The following rates were
gathered:
Weighted average cost of capital
15%
18%
Land average price increase per year
Inflation rate
4%
What is the net benefit from investing in this property if ABC holds the land for 10
years?
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