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Assignment 5. Deciding to buy or rent Your task Determine if it would be economically better for you to buy a home or rent an apartment. Format Submit a clear and concise professional report. Staple this paper to the end of your report. Content Imagine you have decided to stay at the university six more years to do a master's degree and then a PhD. (Don't worry this is fictitious; and besides, on the happy side, we will also imagine you can afford to buy a house ). The question is whether it would be economically better to buy a home and sell it in six years or is it better to just rent an apartment To work out this problem you will need to make a few assumptions!. Figure 1 shows the cash flow diagram that you will assume for each alternative and Table 1 describes the cash flows. You may choose to include other items, such as utilities, parking fees, association fees, etc. You might even want to think of a dollar value to put on a few non-monetary costs and benefits (see question 4 below). Use Future Worth Analysis to compare the two alternatives. Choose your MARR. Assume your MARR is adjusted for inflation. Show your estimates for all the items in Table 1. In your report include sources and assumptions Also, answer these questions: 1. Based only on future worth analysis, which alternative should you choose? 2. How do you think the calculated FW would change if you only lived there for 2 yrs? What about 25 yrs? 3. What are other monetary costs and benefits that I did not ask you to consider? 4. What are some non-monetary costs and benefits that you could consider? Give examples with dollar values". 5. Considering your answers to questions 3 and 4, would you choose differently? Why? 6. Your annual house payment is probably more than your annual rent: so, when we conduct an economic analysis like this, what are we assuming about your "extra money each month if you rent? 7. What are some of the risks involved with each alternative? 8. What is the "do nothing alternative? Is it feasible for you? Grading Criteria Poor Perfect 0 1 2 3 Is the required content complete and appropriate? 0 1 2 3 Are the calculations correct? 0 1 2 Is it in report format (with headings, pg is, Tols and Figs, etc.)? 0 1 Is the text clear, concise, and free of grammatical errors? 0 1 How does it compare with the best looking report in the class? Note that 2 out of points on each project are for the quality of your report. Please refer to the example on the class webpage or consult the instructor for information about making professional, high quality reports. You can name and organize the sections of your report any way you want, but at least include an "Introduction" and "Conclusion. Give al figures and tables a title and refer to them in the text before they are shown. Tables must have column headings "The choice to buy or rent is complicated and complex. More information can be found in this New York Times article: http://www.nytimes.com/2008/05/28/business/28leonhardt.html Associated with this article is a helpful calculator: http://www.nytimes.comteractive/business/buy.rent-calculator.html The NYT calculator uses a method similar to what you use for this assignment. You can use the NYT calculator to check your answers and experiment with other input values. Note the "advanced settings. Also, for the NYT calculator year 6 is our year 7. Assignment 5. Deciding to buy or rent Your task Determine if it would be economically better for you to buy a home or rent an apartment. Format Submit a clear and concise professional report. Staple this paper to the end of your report. Content Imagine you have decided to stay at the university six more years to do a master's degree and then a PhD. (Don't worry this is fictitious; and besides, on the happy side, we will also imagine you can afford to buy a house ). The question is whether it would be economically better to buy a home and sell it in six years or is it better to just rent an apartment To work out this problem you will need to make a few assumptions!. Figure 1 shows the cash flow diagram that you will assume for each alternative and Table 1 describes the cash flows. You may choose to include other items, such as utilities, parking fees, association fees, etc. You might even want to think of a dollar value to put on a few non-monetary costs and benefits (see question 4 below). Use Future Worth Analysis to compare the two alternatives. Choose your MARR. Assume your MARR is adjusted for inflation. Show your estimates for all the items in Table 1. In your report include sources and assumptions Also, answer these questions: 1. Based only on future worth analysis, which alternative should you choose? 2. How do you think the calculated FW would change if you only lived there for 2 yrs? What about 25 yrs? 3. What are other monetary costs and benefits that I did not ask you to consider? 4. What are some non-monetary costs and benefits that you could consider? Give examples with dollar values". 5. Considering your answers to questions 3 and 4, would you choose differently? Why? 6. Your annual house payment is probably more than your annual rent: so, when we conduct an economic analysis like this, what are we assuming about your "extra money each month if you rent? 7. What are some of the risks involved with each alternative? 8. What is the "do nothing alternative? Is it feasible for you? Grading Criteria Poor Perfect 0 1 2 3 Is the required content complete and appropriate? 0 1 2 3 Are the calculations correct? 0 1 2 Is it in report format (with headings, pg is, Tols and Figs, etc.)? 0 1 Is the text clear, concise, and free of grammatical errors? 0 1 How does it compare with the best looking report in the class? Note that 2 out of points on each project are for the quality of your report. Please refer to the example on the class webpage or consult the instructor for information about making professional, high quality reports. You can name and organize the sections of your report any way you want, but at least include an "Introduction" and "Conclusion. Give al figures and tables a title and refer to them in the text before they are shown. Tables must have column headings "The choice to buy or rent is complicated and complex. More information can be found in this New York Times article: http://www.nytimes.com/2008/05/28/business/28leonhardt.html Associated with this article is a helpful calculator: http://www.nytimes.comteractive/business/buy.rent-calculator.html The NYT calculator uses a method similar to what you use for this assignment. You can use the NYT calculator to check your answers and experiment with other input values. Note the "advanced settings. Also, for the NYT calculator year 6 is our year 7