CEO Blowhard continues his economic wisdom by discussing his rationale for calculating the present value of the rents he might save by purchasing a building to house his firm: "We could save $25,000 per year in rent by purchasing our own building. Over a 25-year horizon, Nicholson and Snyder's Table 14A.3 tells me that the present value of these savings is about $350,000 using a real interest rate of 5 percent. But that is clearly an understatement since our rents are bound to rise because of general inflation. Hence, I'm sure it would be worthwhile for us to purchase a building costing up to at least $500,000." Has the CEO got it right now? How should he take into account the expected inflationary increases in rent in the future?