You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for the first year and $850 per month for the second year, you must sign a two year rent agreement with the landlord. The rent for the second apartment is $0 for the fırst 4 month because the apartment complex is being renovated. What should new rent payment for the remaining 20 month be to be indifferent between the two apartments? The interest rate is .5 percent per month. Problem 2: You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for the first year and $850 per month for the second year, you must sign a two-year rent agreement with the landlord. The rent for the second apartment is $500 for the first 4 month because the apartment complex is being renovated, after that the rend increases to $900 for the remaining 20 months. At what interest rate would you be indifferent between the two rent agreements? Problem 3: You are interested in buying a coffee shop. Your accountant provides you with the projected monthly income from the business for the next 2 years. In month 1 to 3: cash flow is -100, in month 4 to 9 cash flow is + 400, in month 10 to 16 cash flow is + 900 and in month 17 to 24 cash flow is + 1100. You have decided that your required rate of return on the coffee shop is 13% and the cost of capital is 8%. What is the most you should be paying for the coffee shop?
You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for the first year and $850 per month for the second year, you must sign a two year rent agreement with the landlord. The rent for the second apartment is $0 for the fırst 4 month because the apartment complex is being renovated. What should new rent payment for the remaining 20 month be to be indifferent between the two apartments? The interest rate is .5 percent per month. Problem 2: You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for the first year and $850 per month for the second year, you must sign a two-year rent agreement with the landlord. The rent for the second apartment is $500 for the first 4 month because the apartment complex is being renovated, after that the rend increases to $900 for the remaining 20 months. At what interest rate would you be indifferent between the two rent agreements? Problem 3: You are interested in buying a coffee shop. Your accountant provides you with the projected monthly income from the business for the next 2 years. In month 1 to 3: cash flow is -100, in month 4 to 9 cash flow is + 400, in month 10 to 16 cash flow is + 900 and in month 17 to 24 cash flow is + 1100. You have decided that your required rate of return on the coffee shop is 13% and the cost of capital is 8%. What is the most you should be paying for the coffee shop?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Problem 1:
You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for
the first year and $850 per month for the second year, you must sign a two year rent agreement with the landlord.
The rent for the second apartment is $0 for the first 4 month because the apartment complex is being renovated.
What should new rent payment for the remaining 20 month be to be indifferent between the two apartments? The
interest rate is .5 percent per month.
Problem 2:
You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for
the first year and $850 per month for the second year, you must sign a two-year rent agreement with the landlord.
The rent for the second apartment is $500 for the first 4 month because the apartment complex is being renovated,
after that the rend increases to $900 for the remaining 20 months. At what interest rate would you be indifferent
between the two rent agreements?
Problem 3:
You are interested in buying a coffee shop. Your accountant provides you with the projected monthly income from
the business for the next 2 years. In month 1 to 3: cash flow is -100, in month 4 to 9 cash flow is + 400, in month 10
to 16 cash flow is + 900 and in month 17 to 24 cash flow is + 1100. You have decided that your required rate of
return on the coffee shop is 13% and the cost of capital is 8%. What is the most you should be paying for the coffee
shop?
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