A tenant wants to lease a building for $50,000 per year. She signs a five-year rental agreement that states that she will pay $25,000 every six months for the next five years. Draw the timeline for her rental payments, assuming she makes the first payment immediately?
Sol:
Lease amount = $50,000 per year
Period = 5 years, Semiannual = 5 x 2 = 10
Lease payment = $25,000 per six month
Timeline for her rental payments, assuming she makes the first payment immediately
| Date(Years) | 0 | 1/2 | 1 | 1 1/2 | 2 | 2 1/2 | 3 | 3 1/2 | 4 | 4 1/2 | 5 |
| Cash Flows (thousands) | -$25.00 | -$25.00 | -$25.00 | -$25.00 | -$25.00 | -$25.00 | -$25.00 | -$25.00 | -$25.00 | -$25.00 | 0.00 |
The tenant is making lease payment every six month, hence its a cash outflow for her and represented with a negative sign.
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