Deferred Annuity. Carey Company Owns a Plot of Land on Which Buried

question 138

Essay

Deferred annuity.
Carey 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, Carey wishes to sell the land now. It has located two potential buyers: Buyer A, who is willing to pay $575,000 for the land now, and Buyer B, who is willing to make 20 annual payments of $90,000 each, with the first payment to be made 5 years from today. Assuming that the appropriate rate of interest is 9%, to whom should Carey sell the land? Show calculations.

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Definitions:

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Hair growth on the chin, cheeks, and neck area of a person's face, typically observed in adult males.

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