You are currently paying rent every year for your restaurant. You still have a contract that will last 2 more years. Starting today, your rent will increase every year by 3.5%.
Think of the amount of rent you are paying right now. Then, determine how much rent you will be paying after 2 years.
Imagine that after two years you will have the opportunity to change rent contracts.
Show a situation in which it would be beneficial and one situation in which it would not be beneficial to change contracts.

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adioabiola adioabiola · Answer 1 · 2021-11-30T19:46:32+01:00

The amount to be paid in rent after 2 years if the rent as of now is $3,000 will be; $3,213.675

The question allows that we choose the amount being paid as rent as of now.

Let the rent paid as of now be; $3,000

In essence; after the first year; the amount increases by 3.5% to become;

After the second year; we have;

Ultimately; the amount to be paid after 2 years will be; $3,213.675.

When given the opportunity to change rent contracts;

A situation that will be beneficial would be a 3.5% reduction in rent per year
A situation that will not be beneficial would be a 7% increase in rent per year.