What should be the price of the third home

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A third home, again comparable to the one that sold for $75,000, is being offered for sale. The only difference between this third home and the $75,000 home is the property taxes. The $75,000 home's property taxes are $1,500 per year, while the third home's property taxes are $1,000 per year. The differences are due to vagaries in how property tax assessors assessed the taxes when the homes were built. In this tax jurisdiction, once annual taxes are set, they are fixed for the life of the home.

Problem 1: Assuming the market rate of interest is still 7.5%, what should be the price of this third home? Why?

Reference no: EM132927907

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