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Joseph found two feasible options for an apartment to rent for the next 2 years. Option A requires monthly rent of $1,000 to be
Joseph found two feasible options for an apartment to rent for the next 2 years. Option A requires monthly rent of $1,000 to be paid at the beginning of each month. Option B allows for end-of-month rent payments of $1,000 (same amenities as in option A). Joseph 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 Joseph 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 Present value LA $ Option A Option B Joseph would choose because he would effectively be paying in rent over this two-year period.
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