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Question 1 (To be completed both in Word and/or Excel document. If you do use Excel to complete the question, please screenshot Excel Answer/formula/table into Word document) (25 Marks) You just signed a rental agreement for a property next to your work. The contract allows you to stay for 5 years, the rent is $400 per week paid beginning of each week and is expected to increase 2% per year. Shortly after the agreement is signed, the agent told you that due to the Covid-19 situation, the owner has returned from overseas and would like to live in his house. The owner would like to break the rental contract and offers you a compensation. You look around the area and find out that the rent on a similar property is $420 per week and if you would like to rent for 5 years, the rent has to be increased by 4% per annum. What is the minimum compensation you are willing to accept from the owner so that you are not worse off? Discount rate is 8% per annum. Hint: Cash flows are assumed to happen at the beginning of each year. Also, please assume 52 weeks in a year Please show your working steps, formulas, and calculation in detall Page 2 of 10 2 7 10 3
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