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Sunset Properties, Inc., is considering investing $250 million in land that it will hold for 25 years and then resell.

Sunset Properties, Inc., is considering investing $250 million in land that it will hold for 25 years and then resell. The investment generates pretax net cash flows of $40 million per year, expressed in todayís prices. Land values are expected to rise at the rate of 7% per year, while other prices are expected to rise at 2% per year. The tax rate is 45%. Forecast the cash flow stream generated by this investment.

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8196601.xlsx

SOLUTION:
Year Cash Flows (Pre tax) Tax Rate Cash Flows (after tax) 0
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25 -$250.00
$40.80
$41.62
$42.45
$43.30
$44.16
$45.05
$45.95...

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