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Instead of paying $10,000 in annual rent for an office space forthe next 10 years, an engi

Instead of paying $10,000 in annual rent for an office space forthe next 10 years, an engi

Instead of paying $10,000 in annual rent for an office space forthe next 10 years, an engineering consulting firm that you work fordecides to take out a $100,000 loan at 6% interest for the same 10year period. The firm will invest the $10,000 saved in rent eachyear into an account that earns 18% (growth stocks). Choose theresult of the analysis that you will convey to the firm. Does thismake financial sense?

a. Need $3300/year more, NO

b. Break even

c. Bonus $1600/year, YES

d. Need $1800/year more, NO

e. none of these

Abhinav 04-Dec-2019

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