Appropriate rate of interest


Dolan Company owns a plot of land on which buried toxic wastes have been discovered. Since it will require several years and a considerable sum of money before the property is fully detoxified and capable of generating revenues, Dolan wishes to sell the land now. It has located two potential buyers: Buyer A, who is willing to pay $385,000 for the land now, and Buyer B, who is willing to make 20 annual payments of $60,000 each, with the first payment to be made 5 years from today. Assuming that the appropriate rate of interest is 9%, to whom should Dolan sell the land?

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Accounting Basics: Appropriate rate of interest
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