Question

Suppose you bought a house for $3,250,000 to make it a nursing home in the future. But you have not committed to the project and will decide in nine years whether to go forward with it or sell off the house. If real estate values increase annually at 1.5%, how much can you expect to sell the house for in nine years if you choose not to proceed with the nursing home project?

Answer 1

$3,716,050

Step-by-step explanation:

FV = PV × (1 + i)∧n

Present Value (PV) 3250000

Interest Rate (i) 0.015

Number of years (n) 9

(1 + 0.015) ∧ 9

3,250,000 x 1.1434

=$3,716,050