You can buy property today for $2.2 million and sell it in 5 years for $3.2 million. (you earn no rental income on the property.) a. if the interest rate is 10%, what is the present value of the sales price?

PV of the sales price  $1,986,948.23

Explanation:

We will calcualte the present value of the sale price using the present value of a lump sum formula:

Maturity3,200,000

time                         5 years

rate         10% = 10/100 = 0.1

PV        $1,986,948.2338  

This indicates the 3,200,000 in five years are equivalent to 1,986,948.23 dollars Thus, this investment is not profitable as the property will be purchased at 2,200,000

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