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kobusy [5.1K]
3 years ago
13

You are a real estate owner in Bloomington Indiana and you have rented a house to students. You expect to make 6% per year on th

is leasehold investment. The terms of the lease are for 24 months and the rent is due at the beginning of the month. Your savvy renters are Kelley students and they request that the rent be paid, instead, at the end of the month. How much more will the investor receive as a result of payments at the beginning of the month rather than the student's proposed payments at the end of the month over the entire life of the lease?
Business
1 answer:
Lyrx [107]3 years ago
7 0

Answer:

The present value of the contract is 0.5% higher if the rent is paid at the beginning of the month. That is equal to $11.28 for every $100 of rent.

Explanation:

if the rent is paid at the beginning of the month, the present value of the lease contract will be:

PV = monthly rent x PV annuity due factor

we are not given the monthly rent, but we know the PV annuity due factor for 0.5% and 24 periods = 22.67568

if the rent is paid at the end of the month, the PV = monthly rent x PV ordinary annuity factor

the PV ordinary annuity factor, 0.5%, 24 periods = 22.56287

assuming that the rent is $100 (just to calculate a %), the PV of an annuity due = $2,267.57

the PV of an ordinary annuity = $2,256.29

the difference between them = [($2,267.57 / $2,256.29) - 1] x 100 = 0.5%

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Solution :

1.

The income from renting his showroom that Paolo would receive if he allowed to rent his showroom is a Implicit cost as this is a cost which will not be paid in actual.

The wages as well as the utility bills paid by Paolo is an example of explicit cost as this cost would be paid in actual for the businesses and are added in accounting.

The wholesale amount that Paolo pays for the pianos to the manufacturer is an explicit cost and is aid in actual to the manufacturer.

The salary that Paolo could have earned if he choses to be an accountant will be an implicit cost as this cost is not paid in actual.

2. Paolo's accounting profit can be calculated by :

  Accounting profit = revenue - explicit cost

                                 = 851,000 - 476,000 - 281,000

                                = $ 94,000

3. Paolo's economic profit is :

   Economic profit = accounting profit - implicit profit

                             = 94,000 - 34,000 - 71,000

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6 0
2 years ago
Think about different ways people are compensated for work, including salary compensation, hourly wages, and contracted compensa
DENIUS [597]

Answer:

c

Explanation:

salary is a regular fixed payment that a person earns for performing work during a specific period of time.

8 0
3 years ago
How should the headings of a resume be formatted so that they are clear and easy to find?
never [62]
Answer: Capitalized and bold
7 0
3 years ago
Quality that measures usefulness vs. price paid is which definition of quality? A. Conformance to specifications B. Fitness for
Fantom [35]

Answer:

C. Value for price paid

Explanation:

The quality of goods are measured with the usefullness of the goods to the consumer and how much he is willing is pay for the product is etermined by the utility of goods to the consumer. Higher amount is paid for the goods, which has higher utility to the consumer and it also define quality to the consumer. Price and utility of product remain the main determinant for the quality.

Value of price paid is determined by utility or usefulness of the product for each dollar paid to buy it.

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3 years ago
During a recent​ month, Company planned to provide cleaning services to customers for per hour. Each job was expected to take ho
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Answer: B.  $1,050  more than expected.

Explanation:

The company originally planned to have revenue resulting from 30 customers and charging $30 for an estimated 33 hours.

Estimated revenue was;

= 30 * 30 * 3

= $2,700

However, in actuality, they sold to 20 more customers than estimated but only spent 2.5 hours each.

Number of customers = 30 + 20

= 50 customers

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= 50 * 30 * 2.5

= $3,750

Difference is;

= 3,750 - 2,700

= $1,050 more

7 0
3 years ago
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