Someone owns 25 identical properties, each of which produces $60,000 of rental income at the...
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Finance
Someone owns 25 identical properties, each of which produces $60,000 of rental income at the end of each year. Assume the discount rate r = 4% annually.
a. What is the present value of the rental payments for the 25 properties made in perpetuity?
b. Now assume that you decide to give away one property each year at the beginning of each year, starting today, to a local charity. What is the present value of the rental income that the charity will receive in perpetuity under this program? c. Still assuming that you give away one property per year to the local charity, what is the present value of the rental payments that John will receive under this program?
Calculate this result in two ways: i. Using your results from 4.a. and 4.b. (briefly explain your reasoning). ii. Using Dr. Shimkos formula for PVLGA directly.
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