Marin Log Company (MLC) is deciding whether to purchase a woodland in Oregon. The asking price is $1,000,000. The company would have to invest $300,000 from the next year for 5 years to ensure the sustainability of the woodland, and after the 5-year sustainability project the company can start to earn $200,000 per year, with estimated growth of 5% forever.
Question 1: Compute the present value of the woodland. Assuming 15% required rate of return
Number of Years 5
Invest $300,000
Interest rate 15%
In Excel,
PV =(0.15,5,300,000)
PV = $1,005,646.53
The present value of the wood land is %1,005,646.53