Compute the present value of the woodland

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Marin Log Company (MLC) is deciding whether to purchase a woodland in Oregon. The asking price is $1,000,000. The company would have to invest $300,000 from the next year for 5 years to ensure the sustainability of the woodland, and after the 5-year sustainability project the company can start to earn $200,000 per year, with estimated growth of 5% forever.

Question 1: Compute the present value of the woodland. Assuming 15% required rate of return

Number of Years                         5

Invest                                       $300,000

Interest rate                             15%

In Excel,

PV =(0.15,5,300,000)

PV = $1,005,646.53

The present value of the wood land is %1,005,646.53

Reference no: EM132056890

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