Present value at optimal time to sell

Reference no: EM1328559

You own 100 acres of timberland, with young timber worth $20,000 if logged today. This represents 500 cords of wood at $40 per cord. After logging, the land can be sold today for $10,000 ($100 per acre). The opportunity cost of capital is 10%. You have made the following estimates:

i) The price of a cord of wood will increase by 5% per year

ii) The price of land will increase by 3% per year

iii) The yearly growth rate of the cords of wood on your land are: years 1-2: 15%, years 3-4: 10%, years 5-8: 5%, years thereafter: 2%

What is the present value at the optimal time to sell and when does it occur?

Reference no: EM1328559

Questions Cloud

Present value of future amounts : Find out the present value of the following future amounts?

Prepare a presentation for john and michael : Supply Chain Concerns - Prepare a presentation for John and Michael, explaining some of the common symptoms/problems of supply chain management.

Describing the drinking age and traffic safety : During the early and mid-1980s, many states raised their drinking age to 21 in response to federal prompting and as a means of promoting traffic safety.

Describe about supply chain strategy : Supply Chain Strategy: Arizona Public Service Company - Explain how the supply chain strategy supports the overall strategy

Present value at optimal time to sell : You own 100 acres of timberland, with young timber worth $20,000 if logged today. This represents 500 cords of wood at $40 per cord. What is the present value at the optimal time to sell and when does it occur?

How many bits are needed to address : How various bits are required to address a 1M × 8 main memory if Main memory is byte-addressable.

Explaining leadership as a sacred trust : What do you understand when we say leadership is a sacred trust? What does this have to do with developing talent, if anything?

Explaining the administrative rulemaking : List the regulations and the respective administrative agencies the hospital is subject to. Differentiate between relevant administrative adjudication and administrative rulemaking as they pertain to the administrative agencies you have identified.

Strategic alliances and joint ventures : Strategic alliances and joint ventures are often preferred strategies to enter foreign markets and to avoid classic mistakes such as the cookie example.

User Account

All Pages