BUY OR RENT?

Stella got a new job in Columbus. She is trying to decide whether she should rent or buy a house. She expects to stay in the place she gets for $10$ years and then move again.

If she rents, she will owe a $$3,000$ security deposit immediately. It will be refunded at the end of her lease. Her rent is $$1,750,$ to be paid at the end of each month.

To buy, she is considering a house that costs $$300,000.$ She would put $10\%$ as the cash down payment and borrow the rest from a bank. Her bank has offered a fixed rate of $6\mathrm{.}25\%$ for $10$ years, compounded monthly. In a real estate transaction, the seller pays a $6\%$ commission fee to the realtors $($i$.$e$.$ no such expense when she buys the house$).$ Assume the value of the house is $$360,000$ in $10$ years.

Should she rent or buy? Use cash flows to decide.

Please put your final calculation $($NPV or IRR$/$EAR$)$ and decision in Rows $9$ and $10.$Calculation

Decision