Calculate the investment company accounting earnings

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You manage a real estate investment company. one year ago, the company purchased 10 parcels of land distributed throughout the community for $10 million each. A recent appraisal of the properties indicates that five of the parcels are now worth $8 million each, while the other five are worth $16 million each. Ignoring any income received from the properties and any taxes paid over the year, calculate the investment company's accounting earnings and its economic earnings in each o0f the following cases: a) the company sells all of the properties at their appraised values today b) the company sells none of the properties c) the company sells the properties that have fallen in value and keeps the others d) the company sells the properties that have risen in value and keeps the others e) after returning from a property management seminar, and employee recommends the company adopt an end-of-year policy of always selling properties that have risen in value since purchase, and always retaining properties that have fallen in value. The employee explains that with this policy the company will never show a loss on its real estate investment activities. Do you agree with the employee ? Why, or why not?

Reference no: EM13275736

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