Question

Jackson Enterprises has just spent $230,.000 to purchase land for a future beach front property development project that will include rental cabins, lodge, and recreational facilities. Jackson Enterprises has not committed to the development project, but will decide in five years whether to go forward with the projec or sell off the land. Real estate values increase annually at 4.5% for unimproved property in this area. For how much can Jackson Ente prises e ect to sel the sells? property in five years if it chooses not to proceed with the beach front development project? What if Jackson Enterprises holds the property for ten years and then For how much can Jackson Enterprises expect to sell the property in five years if it chooses not to proceed with the beach front development project? (Round to the nearest cent.)

Answer 1

Jackson Enterprises can expect to sell the property for approximately $284,684.99 if they decide not to proceed with the beachfront development project in five years. If they hold the property for ten years and then decide not to proceed, they can expect to sell it for approximately $361,426.47.

Step-by-step explanation:

In five years, if Jackson Enterprises chooses not to proceed with the beachfront development project, they can expect to sell the property for a higher amount than their initial purchase price due to the annual increase in real estate values. To calculate the expected selling price, we can use the formula:

Selling Price = Purchase Price * (1 + growth rate)^n

Where:

Purchase Price = $230,000

Growth Rate = 4.5% = 0.045 (annual increase in real estate values)

n = 5 (number of years)

Plugging in the values into the formula:

Selling Price = $230,000 * (1 + 0.045)^5

Selling Price = $230,000 * 1.23777

Selling Price ≈ $284,684.99

Therefore, if Jackson Enterprises chooses not to proceed with the beachfront development project in five years, they can expect to sell the property for approximately $284,684.99.

If Jackson Enterprises holds the property for ten years, the calculation would be:

Selling Price = $230,000 * (1 + 0.045)^10

Selling Price = $230,000 * 1.57352

Selling Price ≈ $361,426.47

Therefore, if Jackson Enterprises holds the property for ten years and then decides not to proceed with the beachfront development project, they can expect to sell the property for approximately $361,426.47.