After Getting Her Degree in Marketing and Working for 5

question 14

Multiple Choice

After getting her degree in marketing and working for 5 years for a large department store,Sally started her own specialty shop in a regional mall.Sally's current lease calls for payments of $1,000 at the end of each month for the next 60 months.Now the landlord offers Sally a new 5-year lease which calls for zero rent for 6 months,then rental payments of $1,050 at the end of each month for the next 54 months.Sally's required rate of return is 11 percent.By what absolute dollar amount would accepting the new lease change Sally's theoretical net worth? (Hint: The required rate of return per month is 11%/12 = 0.9166667%. )

• A) $2,810.09
• B) $3,243.24
• C) $3,803.06
• D) $4,299.87
• E) $4,681.76

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Definitions:

Assumption

A belief or statement taken for granted without proof, often serving as a starting point for further reasoning or argument.

Add

To combine one thing with another so as to increase the size, number, or amount.

Assumption

A premise or statement taken to be true without evidence for the sake of argument or investigation.

UI

Universal Instantiation, a logical rule of inference stating if something is true for everything in a category, it is true for any specific instance of that category.