Richard’s Tree farm , Inc is doing well after its incorporation. Jake Richards, president, chief of operations and majority shareholder, currently has a planting of 10,000 three year old Japanese dogwood trees in a recently introduced pink flowered variety.
Size. Age. Current market value $
6 3 years 24
8 6 years 34
10 9 years. 40
a) Because of inflation, Jake expects the price at which he can sell the trees to increase by 3% per year. What price does he expects to receive if he keeps the trees until they reach 8feet or 10 feet tall?
b. Using Jake discounts the future price of the trees at 10% per year, what’s the present value of their future prices?
C. Using the time value of money equation, compute the growth rate of the trees between the third year and the sixth year and between the sixth year and the ninth year
d. When should Jake sell the trees?
e. A major landscape contractor who has successfully on a large-scale Boston beautification and urban greening project has offered to buy 10,0000 flowering dogwood trees at a price of $28,000, payable immediately………… lower than the price estimated Question: Should Jake accept the offer if his required rate of return is 10%