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W14403
TIME VALUE OF MONEY: THE BUY VERSUS RENT DECISION
Sean Cleary and Stephen Foerster wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
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University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2014, Richard Ivey School of Business Foundation
Version: 2015-06-05
In May 2013, Rebecca Young completed her MBA and moved to Toronto for a new job in investment
banking. There, she rented a spacious, two-bedroom condominium for $3,000 per month, which included
parking but not utilities or cable television. In July 2014, the virtually identical unit next door became
available for sale with an asking price of $620,000, and Young believed she could purchase it for
$600,000. She realized she was facing the classic buy-versus-rent decision. It was time for her to apply
some of the analytical tools she had acquired in business school — including “time value of money”
concepts — to her personal life.
While Young really liked the condominium unit she was renting, as well as the condominium building
itself, she felt that it would be inadequate for her long-term needs, as she planned to move to a house or
even to a larger penthouse condominium within five to 10 years — even sooner if her job continued to
work out well.
Friends and family had given Young a variety of mixed opinions...