- +44 141 628 6080
- [email protected]

If the couple requires at least a 13 percent return on

Fred and Frieda have always wanted to enter the blueberry business. They locate a 50- acre piece of hillside in Maine that is covered with blueberry bushes. They figure that the annual yield from the bushes will be 200 crates. Each crate is estimated to sell for $400 for the next 10 years. This price is expected to rise to $500 per crate for all sales from years 11 through 20.

In order to get started, Fred and Frieda must pay $150,000 for the land plus $20,000 for packing equipment. The packing equipment will be depreciated on a straight-line basis to a zero estimated salvage value at the end of 20 years. Fred and Frieda believe that at the end of 20 years, they will want to retire to Florida and sell their property.

Annual operating expenses, including salaries to Fred and Frieda and exclusive of depreciation, are estimated to be $50,000 per year for the first 10 years and $60,000 thereafter. The land is expected to appreciate in value at a rate of 5 percent per year. The couple's marginal tax rate is 30 percent for both ordinary income and capia.

a. If the couple requires at least a 13 percent return on their investment, should they enter the blueberry business?

b. Assume that the land can be sold for only $50,000 at the end of 20 years (a capital loss of $100,000). Should the couple invest in the land and blueberry business? (Assume that the couple may claim the full amount of their capital loss in the year it occurs year 20)

Expected delivery within 24 Hours

1944725

Questions

Asked

3,689

Active Tutors

1439227

Questions

Answered

**
Start Excelling in your courses, Ask a tutor for help and get answers for your problems !! **

Â©TutorsGlobe All rights reserved 2022-2023.

## Q : Develop a valuation model for the long-term corporate bond

develop a valuation model for the long-term corporate bond with a face value at maturity of 100000 a maturity of 10