Question Solved1 Answer FULL SOLUTION PLEASE with formulas.As rental for a building, the owner received two offers:a. P50,000 a year for 8 years, the rental for each year being paid at the beginning of each yearb. P30,000 the first year, P40,000 the second year, P50,000 the third year, and P60,000 for the next 5 years with all rentals paid at the beginning of each year.If money is worth 12% effective, which is the better offer?

TICMRF The Asker · Accounting
FULL SOLUTION PLEASE with formulas.

As rental for a building, the owner received two offers:

a. P50,000 a year for 8 years, the rental for each year being paid at the beginning of each year

b. P30,000 the first year, P40,000 the second year, P50,000 the third year, and P60,000 for the next 5 years with all rentals paid at the beginning of each year.

If money is worth 12% effective, which is the better offer?
More
See Answer
Add Answer +20 Points
Community Answer
MSUV4Y The First Answerer
See all the answers with 1 Unlock
Get 4 Free Unlocks by registration

Requirement a)p = Annual Payment = 50,000n = 8 yearsr = 12% = 0.12Present Value ofAnnuity Due := p**[(1-((1)/((1+r)^(n))))/(r)]**(1+r)= 50000**[(1-((1)/((1+0.12)^(8))))/(0.12)]**(1+0.12)= 50000**[(1-((1)/((1.12)^(8))))/(0.12)]**(1.12)= 50000**[(1-0.403883)/(0.12)]**(1.12)= 50000**4.96764**1.12= $278,187.84Requirement b)Payments:P1 = 30,000P2 = 40,000P3 = 50,000P4 = 60,000P5 = 60,000P6 = 60,000P7 = 60,000P8 = 60,000Present Value ofunequal payments:=(P0)/((1+r)^(0))+dots.+(Pn)/((1+r)^(n))= (30000)/((1.12)^(0))+(40000)/((1.12)^(1))+(50000)/((1.12)^(2))+(60000)/((1.12)^(3))+(60000)/((1.12)^(4))+(60000)/((1.12)^(5) ... See the full answer