Mark found two feasible options for an apartment to rent for the next 2 years. Option A requires monthly rent of $1,300 to be paid at the beginning of each month. Option B allows for end-of-month rent payments of $1,300 (same amenities as in option A). Mark uses a fairly high annual discount rate of 24% (sadly, he is also a high credit risk). Find the PV of the future rent payments for both options over the 2-year time period and explain which one Mark will prefer, if he bases his decision strictly on cash flow. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places e.g. 5,125.36.) Click here to view the factor table Option A Option B Present value $ $ Mark would choose , because he would effectively be paying in rent over this two-year period.
Mark found two feasible options for an apartment to rent for the next 2 years. Option A requires monthly rent of $1,300 to be paid at the beginning of each month. Option B allows for end-of-month rent payments of $1,300 (same amenities as in option A). Mark uses a fairly high annual discount rate of 24% (sadly, he is also a high credit risk). Find the PV of the future rent payments for both options over the 2-year time period and explain which one Mark will prefer, if he bases his decision strictly on cash flow. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places e.g. 5,125.36.) Click here to view the factor table Option A Option B Present value $ $ Mark would choose , because he would effectively be paying in rent over this two-year period.
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter17: Accounting For Notes And Interest
Section: Chapter Questions
Problem 1MYW
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