You Inherited 100 Acres of Iowa Farmland

question 52

Multiple Choice

You inherited 100 acres of Iowa farmland. There is an active market in this type of land, and similar properties currently sell for $10,000 per acre. If the land is planted with corn, you expect that the land will deliver net cash flows of $800 per acre forever. If the discount rate is 10 percent, how much is the land worth per acre?

• A)$10,000
• B)$8,000
• C)$18,000
• D)$12,000

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