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# You decide to sell a piece of land that you inherited a few years ag

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You decide to sell a piece of land that you inherited a few
years ago. The buyer agrees to either pay you \$24,000 at
closing or according to the schedule below (payments are
assumed to be at the beginning of each of the 5 years).
You do not really need the money today and are planning
either way to just let the funds accumulate in an account
earning 7%. However, you do plan to use the funds at the
end of 5 years after closing on the land transaction to build
a new home. Which alternative provides the highest future
value at the end of 5 years? Beginning of Year Cash Flow
1 \$2,000 2 \$4,000 3 \$6,000 4 \$8,000 5 \$10,000
Solution
option A
pay you \$24,000 now
FV = 24,000*(1+0.07)^5 = \$33661.24
option B
pay as per schedule
FV = 2000(1.07)^5 + 4000(1.07)^4 + 6000(1.07)^3 +
8000(1.07)^2 + 10000(1.07) = \$35257.74
So option B has higher Future value
So you opt for paying as per schedule for 5 years.

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You decide to sell a piece of land that you inherited a few years ago. The buyer agrees to either pay you \$24,000 at closing or according to the schedule below (payments are assumed to be at the beginning of each of the 5 years). You do not really need the money today and are planning either way to just let the funds accumulate in an account earning 7%. However, you do plan to use the funds at the end of 5 years after closing on the land transaction to build a new home. Which alternative provides th e highest future value at the end of 5 years? Beginning of Year Cash Flow 1 \$2,000 2 \$4,000 3 \$ ...
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