Question: Please help me with the question below. ( I have also attached all the relevant formula sheets as well below) Thank you. 1.You have bought
Please help me with the question below. ( I have also attached all the relevant formula sheets as well below) Thank you.
1.You have bought a property and have four different options on how to pay for the property purchase. The four options are:
(i)$ 200,000 p.a. paid every year for five years with the first payment paid at the end of the first year.
(ii)$250,000 p.a. for six years with the first payment paid at the end of the first year.
(iii)$1,000,000 at the end of the fifth year and $1,250,000 at the end of the 10thyear.
(iv)A $20,000 deposit paid now plus $100,000 p.a. paid forever from the rental of the property. The first $100,000 is paid at the end of the first year.
Required:
Using a required rate of return of 12% p.a., rank the order in which you would pay for the property from cheapest to most expensive, and provide the PV of each option.
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