Bill Ding, a building owner charges annual rent of $20 for the first year, $21...
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Accounting
Bill Ding, a building owner charges annual rent of $20 for the first year, $21 for the second year, and $22 for the third year. The tenant and Bill (the landlord) agreed to a rent reduction as follows: the tenant will receive free rent equal to 6 months of the year 1 rent. However, the rent credit (i.e. the rent reduction), while calculated based on amount of year 1 rent, will only be applied to the rent payable in year 3. The tenant will need to pay the full year 1 and year 2 rents, and in year 3 have 6 months of free rent but calculated using the year 1 rent. Using a 10 percent discount rate, what is the NPV of the total amount of the rent paid over the 3 years?
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