PV of Owner-Financed Sale
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P3-12. Ruth Nail has just received two offers for her seaside home. The first offer is for $1 million today. The second offer is for an owner-financed sale with a payment schedule as follows:
End of Year Payment
0 (Today) $200,000
1 200,000
2 200,000
3 200,000
4 200,000
5 300,000
Assuming no differential tax treatment between the two options and that Ruth earns a rate of 8 percent on her investments, which offer should she take?
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Solution Summary
The solution determines which offer (between the two) Ruth should take for her seaside home based on tax treatment and her investment rate.
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