Question

2. Consider a landlord with a rental housing unit. The landlord discounts cash flows between periods with discount factor ?? (0,1). When the unit is vacant, her payoff per period is normalized to zero. When the unit is rented, the landlord collects a payment of x > 0 per period from the tenant. Each period that the unit is vacant, a new tenant arrives with probability ? ? (0,1), signs a rental agreement, and begins occupying the unit (and paying rent) the following period. Each period that the unit is occupied, the tenant decides to vacate the rental unit at the end of the period (after paying rent) with probability ?? (0, 1). (i) Suppose the landlord's housing unit is currently vacant. Derive an expression for the landlord's present discounted expected value of rental income. (ii) How does parameter ? affect the value of a vacant housing unit? In other words, is your answer to part (i) increasing or decreasing in ?? Briefly explain the economic intuition. (iii) Suppose the landlord's housing unit is currently occupied by a tenant. Derive an expression for the landlord's present discounted expected value of rental income. How does it compare to your answer in part (i)? Briefly explain. 

          2. Consider a landlord with a rental housing unit. The landlord discounts cash flows
between periods with discount factor ?? (0,1). When the unit is vacant, her payoff
per period is normalized to zero. When the unit is rented, the landlord collects a
payment of x > 0 per period from the tenant. Each period that the unit is vacant, a
new tenant arrives with probability ? ? (0,1), signs a rental agreement, and begins
occupying the unit (and paying rent) the following period. Each period that the unit
is occupied, the tenant decides to vacate the rental unit at the end of the period (after
paying rent) with probability ?? (0, 1).
(i) Suppose the landlord's housing unit is currently vacant. Derive an expression
for the landlord's present discounted expected value of rental income.
(ii) How does parameter ? affect the value of a vacant housing unit? In other
words, is your answer to part (i) increasing or decreasing in ?? Briefly explain
the economic intuition.
(iii) Suppose the landlord's housing unit is currently occupied by a tenant. Derive
an expression for the landlord's present discounted expected value of rental
income. How does it compare to your answer in part (i)? Briefly explain.
Show more…
2. Consider a landlord with a rental housing unit. The landlord discounts cash flows between periods with discount factor ?? (0,1). When the unit is vacant, her payoff per period is normalized to zero. When the unit is rented, the landlord collects a payment of x > 0 per period from the tenant. Each period that the unit is vacant, a new tenant arrives with probability ? ? (0,1), signs a rental agreement, and begins occupying the unit (and paying rent) the following period. Each period that the unit is occupied, the tenant decides to vacate the rental unit at the end of the period (after paying rent) with probability ?? (0, 1). (i) Suppose the landlord's housing unit is currently vacant. Derive an expression for the landlord's present discounted expected value of rental income. (ii) How does parameter ? affect the value of a vacant housing unit? In other words, is your answer to part (i) increasing or decreasing in ?? Briefly explain the economic intuition. (iii) Suppose the landlord's housing unit is currently occupied by a tenant. Derive an expression for the landlord's present discounted expected value of rental income. How does it compare to your answer in part (i)? Briefly explain.

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Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
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Consider a landlord with a rental housing unit. The landlord discounts cash flows between periods with discount factor eta in(0,1). When the unit is vacant, her payoff per period is normalized to zero. When the unit is rented, the landlord collects a payment of x>0 per period from the tenant. Each period that the unit is vacant, a new tenant arrives with probability phi in(0,1), signs a rental agreement, and begins occupying the unit (and paying rent) the following period. Each period that the unit is occupied, the tenant decides to vacate the rental unit at the end of the period (after paying rent) with probability delta epsi (0,1). (i) Suppose the landlord's housing unit is currently vacant. Derive an expression for the landlord's present discounted expected value of rental income. (ii) How does parameter phi affect the value of a vacant housing unit? In other words, is your answer to part (i) increasing or decreasing in phi ? Briefly explain the economic intuition. (iii) Suppose the landlord's housing unit is currently occupied by a tenant. Derive an expression for the landlord's present discounted expected value of rental income. How does it compare to your answer in part (i)? Briefly explain. 2. Consider a landlord with a rental housing unit. The landlord discounts cash flows between periods with discount factor 3 e (01). When the unit is vacant. her pavoff per period is normalized to zero. When the unit is rented, the landlord collects a payment of x > 0 per period from the tenant. Each period that the unit is vacant, a new tenant arrives with probability e (0,1), signs a rental agreement, and begins occupying the unit (and paying rent) the following period. Each period that the unit is occupied, the tenant decides to vacate the rental unit at the end of the period (after paying rent) with probability & e (0,1). (i) Suppose the landlord's housing unit is currently vacant. Derive an expression for the landlord's present discounted expected value of rental income. ii) How does parameter affect the value of a vacant housing unit? In other words, is your answer to part (i) increasing or decreasing in ? Briefly explain the economic intuition. (iii) Suppose the landlord's housing unit is currently occupied by a tenant. Derive an expression for the landlord's present discounted expected value of rental income. How does it compare to your answer in part (i)? Briefly explain.
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Transcript

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00:01 Hello students, here is a question.
00:02 A store has 5 years remaining on the lease of a mall.
00:05 Rent is 1 ,900 per month.
00:07 60 payments are remaining and the next payment is due on 1st month.
00:12 So, the mall's owner plans to sell the property in a year and wants to rent at time of high so the property will appear more valuable.
00:20 So, therefore, the store has been offered a great deal on a new 5 years lease.
00:24 So, we have some information given in the question.
00:26 So, based on that information, we have to find out what is the rent per month.
00:31 Also the nominal wacc.
00:35 So, let us do the solution for this.
00:37 We have three sub questions to solve here.
00:39 So, let us do the solution for the first one.
00:45 So, first one is a present value of 60 payment.
00:51 Present value of 60 payments are rent is 1 ,900.
01:05 Periods are 60 and rate is 12%.
01:12 The present value of 60 payment will be.
01:21 So, in excel we have to type is equal to fv open bracket 1 % , 9, 2, minus 85 ,414, 85 ,414 .57.
01:34 So, we get answer as 93 ,416 .66 and the periods is, periods are 51 and the rate is 12%...
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