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ra1l [238]
3 years ago
11

. A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year, but is providin

g six months of free rent in the first year as a concession. Using a 10 percent discount rate, what is the effective rent over the three years
Business
1 answer:
Anit [1.1K]3 years ago
8 0

Answer: $17.28

Explanation:

6 month free concession in first year drops rent to:

= 20 / 2

= $10

Effective rent = [Present value of Year 1 rent + Present value of Year 2 rent + Present value of Year 3 rent ] / [ 1 - (1 / (1 + rate)^ number of years) / rate]

= [(10 / (1 + 10%) ) + (21 / (1 + 10%)²) + (22 / (1 + 10%)³)] * [1 - (1 / (1 + 10%)³/ 10%)]

= (9.09 + 17.355 + 16.5289) / 2.48685

= $17.28

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