ITT Assignment – 2017PGP180 – Vignesh S – Students dilemma- Rent or Buy

1)
a) Costs incurred for Scott for 3 years (inclusive) – $18696

b) Costs incurred for Scott for 3 years (non-inclusive) –$17222

c) Income earned by Scott for 3 years (buying and renting inclusively) – 15291.94 (Profits after deducting
her costs)

d) Income earned by Scott for 3 years (buying and renting non-inclusively) - 16515.94
2)
By performing Monte Carlo analysis to check the average selling price of the house, it can be found that
Scott can pay back her debt by depending only on the amount she gets while selling. So, she had no risk
for any cases of depreciation or appreciation.
(she even gets profit by renting for 3 years after payment of loan instalment)
3)
By considering the given data (appreciation of 2%), she will get a high amount when she buys only, as
she will get 25000 from her parents too if only she bought the house. Else she will have 25000 in the
bank earning 1% interest i.e., Rs.250 per year or 757.52 for 3 years (compounded yearly) which is clearly
less than what she earns on buying and selling the house (renting it too). So, best option is to buy the
house and rent it.
Inclusive or non-inclusive:
From Excel It is evident that she earns Rs. 80554.90 by buying and renting it non-inclusive at the end of
the 3rd year after selling the house.
Buy and Rent Non-Inclusive is the best option

Declaration:
Student’s Dilemma- Rent or Buy Assignment number 2 of ITT is completely done by myself. No practices
of other means are used to solve the problem. (neither from batch mates or from seniors). I am solely
responsible for any discrepancies in the answers.