Question

4. Osman İnşaat A.Ş. He is considering renting an old inn in Ankara for 30 years. At the end of the 30th year, the building will be returned to the land owner. This is suitable for making a modern residential building a theater or a modern inn again. If i = 25%, which alternative should the company choose? Evaluate according to the present value analysis method. (20 points) Investment amount Monthly Income Modern residence 4,000,000 TL 150,000 TL Theater 2.750.000 TL 81.500 TL Modern Inn 6,000,000 TL 250,000 TL 

          4. Osman İnşaat A.Ş. He is considering renting an old inn in Ankara for 30 years. At the end of the 30th year, the building will be returned to the land owner. This is suitable for making a modern residential building a theater or a modern inn again. If i = 25%, which alternative should the company choose? Evaluate according to the present value analysis method. (20 points)

Investment amount Monthly Income
Modern residence 4,000,000 TL 150,000 TL
Theater 2.750.000 TL 81.500 TL
Modern Inn 6,000,000 TL 250,000 TL
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Added by Ahmed A.

Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
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4. Osman İnşaat A.Ş. He is considering renting an old inn in Ankara for 30 years. At the end of the 30th year, the building will be returned to the land owner. This is suitable for making a modern residential building a theater or a modern inn again. If i = 25%, which alternative should the company choose? Evaluate according to the present value analysis method. (20 points) Investment amount Monthly Income Modern residence 4,000,000 TL 150,000 TL Theater 2.750.000 TL 81.500 TL Modern Inn 6,000,000 TL 250,000 TL
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Transcript

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00:01 So, here in this question, firstly, in modern residence, in modern residence, modern residence, the investment amount is, the investment amount, investment amount is 40000 and 000 tl and the monthly income, the monthly income is 150000 tl, 150000 tl.
00:42 The cash flows for the modern residence option are constant through the 30 year period.
00:49 So, over here, the present value can be calculated as the monthly income which is represented by m i into 1 minus 1 plus i raised to the power minus n upon i, where i is the interest rate and n is the number of periods, that is 30 years.
01:13 Now, by plugging in the values, the pv can be or the present value can be calculated as 150000 into 1 minus 1 plus 0 .25 raised to the power minus 30 upon 0 .25 and by calculating this, the present value comes out to be 5573 600 tl...
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