A farmer has recently bought a land for $2,000.00 and planned on selling the land in 8 years. The real price of land is expected to increase at 2% each year. Suppose that the inflation rate is 14% and the marginal tax rate is 11%.
(i) Calculate the real land price.
a. $1,526.11 b. $2,034.81
c. $2,484.87 d. $2,343.32
e. None of the answers are correct
(ii) Calculate the before-tax nominal terminal value.
a. $2,343.32 b. $6,684.52
c. $2,015.25 d. $2,085.55
e. None of the answers are correct
(iii) Calculate the after-tax-nominal terminal value.
a. $6,169.22 b. $1,828.02
c. $5,490.61 d. $5,949.22
e. None of the answers are correct