Own or rent analysis. Linda wants to purchase a property at the beginning of 2019 and plans to sell at the end of 2019. The loan payment is by annual and is fully amortizing FRM. The information for analysis is as below:

Property purchase price at the beginning of 2019	$200,000
LTV Ratio	80%
Annual Interest rate	6%
Loan term	30 years
Annual rent	$15,000
Property sell price at the end of 2019	$235,000
Annual insurance	$500
Annual maintenance	$500
Marginal tax rate	28%
Property tax rate	1.50% based on the purchase price at the beginning of 2019
Annual discount rate	12%
Selling expense	6% of sell price at the end of 2019
No sales tax

Please answer the question of whether Linda needs to make the purchase by calculating the cost of owning, benefit of owning, the NPV and IRR of this purchase.

Answer rating: 100% (QA)

Purchase Price of Machine 200000 Loan to Value of Machine 80 Loan Availment 160000 Principal Incepti... View the full answer