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Linear Gradient

2.- I am going to rent my house in advance and I plan to charge 200,000 a year and increase 10,000 each year, what should I c

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Answer #1

Let the Rent in Year n be CFn

Given,
CF1 = $200000
CF2 = $210000
CF3 = $220000
CF4 = $230000
CF5 = $240000

Interest rate = r = 9%

The advance charge should be the present value of all the future payments

Hence, Advance Charge = CF1/(1+r) + CF2/(1+r)2 + CF3/(1+r)3 + CF4/(1+r)4 + CF5/(1+r)5

= 200000/(1+0.09) + 210000/(1+0.09)2 + 220000/(1+0.09)3 + 230000/(1+0.09)4 + 240000/(1+0.09)5

= $849,040.73

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