Home Growers, a local plant nursery, is considering purchasing a new plot of land for their business for $200,000. The land would allow Home Growers to increase their pre-tax cash flows by $60,000 each year. The company would plan to keep the land for 20 years before selling it for $300,000.
Because the land is real property, the company would not take any related depreciation. Home Grower's tax rate is 25%, and the required rate of return is 9%.
What is the Average Rate of Return of the proposed investment?

Question

Home Growers, a local plant nursery, is considering purchasing a new plot of land for their business for $200,000. The land would allow Home Growers to increase their pre-tax cash flows by $60,000 each year. The company would plan to keep the land for 20 years before selling it for $300,000. 
Because the land is real property, the company would not take any related depreciation. Home Grower's tax rate is 25%, and the required rate of return is 9%.
What is the Average Rate of Return of the proposed investment?

Quizplus · Accepted Answer

The Answer of Home Growers, a local plant nursery, is considering purchasing a new plot of land for their business for $200,000. The land would allow Home Growers to increase their pre-tax cash flows by $60,000 each year. The company would plan to keep the land for 20 years before selling it for $300,000. 
Because the land is real property, the company would not take any related depreciation. Home Grower's tax rate is 25%, and the required rate of return is 9%.
What is the Average Rate of Return of the proposed investment?

Home Growers, a Local Plant Nursery, Is Considering Purchasing a New