Question: A local authority is under severe financial pressure and is considering selling some of the land it owns to a building company. The building company is offering to pay £150 000 for the land now or a payment of £40 000 a year for the next five years.
(a) If the current interest rate is 8 per cent, which option would you advise the local authority to take?
(b) How would your recommendation be affected by changes in the interest rate?
(c) What other factors should the local authority take into account?