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Explain All parts accounting Case 2: Miss. Ayesha is contemplating to buy a leased property that could provide her with steady annual rental income (cashflow)

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Explain All parts accounting

Case 2: Miss. Ayesha is contemplating to buy a leased property that could provide her with steady annual rental income (cashflow) of Rs. 500,000 per year for coming 10 years. She has determined that these cashflows should get her 13% return compounded annually. She has determined this target rate of return by keeping in mind the ongoing 7% inflation in economy, the risk-free rate of 11% on national saving certificates and associated risk with the property. 1. What price she will be willing to place on this property if she could draw the rent at the end of each year? (Hint present value) 2. What price she will be willing to place on this property if she could draw the rent at the beginning of each year? (Hint present value) 3. Will she be willing to buy property if the actual price the property is 2,800,000 currently? Will the decision remain same for both of cases in 1 and 2 above? 4. What will be price of the property for her if she could get the right to sell the property with the expected price of Rs 3,400,000 (both in case 1 and 2) at the end of 10th year

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