Help with Present Value calculation of Rent.
Hi there,
I need help calculating the PV of contracted rent given the information below.
Demise: 10,000 sf Face rent (p.a.): £20 psf* Lease term: 5 years Discount rate: 8% * Assumed paid quarterly in advance.
The answer is: £838,080.
Could someone please explain how this answer has been reached?
Many thanks
My answer came out to $833,923.10. It is an annuity due because the payments are at the beginning of the period, so that increases the PV of the stream of cash flows.
EDIT: The formula for an annuity due is:
PVAdue = (pmt / disount rate) * (1 - (1 / ((1 + discount rate)^number of periods))) * (1 + discount rate)
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