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Your company plans to lease a new location, and you believe the rent will increase every year. You estimate that the rent will be $1,000
Your company plans to lease a new location, and you believe the rent will increase every year. You estimate that the rent will be $1,000 next year (Year 1), and will increase by $50 each year until Year 9, at which point you will move out of the location (after paying the rent for that year - there is a cash flow in Year 9). You want to know how much money you should put aside now to pay for the rent (the present value of the cash flows at Year O). To solve for the present value in Year 0, you need to split the cash flows into two pieces. What are these pieces? To solve for the present value in Year 0, you need to split the cash flows into two pieces. What are these pieces? Piece 1: O A. An annuity of $1,000 for 9 years O B. An annuity of $950 for 8 years OC. An annuity of $950 for 9 years OD. An annuity of $1,000 for 8 years Piece 2: O A. A uniform gradient of $1,000 for 9 years OB. A uniform gradient of $100 for 8 years OC. A uniform gradient of $50 for 9 years OD. A uniform gradient of $50 for 8 years
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