Question
ABC Ltd. is a multinational that wants to invest in the real estate business in Barcelona. Two alternatives are offered by the owner of a
ABC Ltd. is a multinational that wants to invest in the real estate business in Barcelona. Two alternatives are offered by the owner of a property in one of the most popular areas of the city. Option A: Renting the property with a perpetual contract, meaning for ever and ever. In this case, the company has to pay 5,000 per month and the contract contains a clause stating that the rent price will be growing at a 0.08% monthly. Option B: Acquiring the property with a mortgage scheme for 45 years. The current ownership is demanding an initial payment of 2,100,000 and a monthly amount of 2,700 . The interest applicable rates are around 3% compounded yearly, this is supposed to be the market rate for this type of activities.
1-The company is thinking a mixed formula: To pay annual rents of 125,000 for the first 20 years (without initial payment), with a yearly interest rate of 3%, and monthly rents of 2,700 for the following 25 years, with an interest rate of 4.5% yearly. In this case, what is the amount that the company should pay after 45 years?
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