Question
You have been appointed in one of the consulting firms around South Africa and your first assignment is to help a client with a decision
You have been appointed in one of the consulting firms around South Africa and your first assignment is to help a client with a decision between two machine and the relevant information is as follows: Sally After getting her degree in marketing and working for 5 years for a large departmental store, Sally started her own specialty shop in a regional mall. Sally's current lease calls for payments of R9 000 at the end of each month for the next 60 months. Now the landlord offers Sally a new 5-year lease which calls for zero rent for 6 months, then rental payments of R9 050 at the end of each month for the next 54 months. Sally's cost of capital is 11 percent. By what absolute rand amount would accepting the new lease change Sally's theoretical net worth? (Hint: The cost of capital per month is 11%/12 = 0.9167 %.)
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