Time Value Money

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Date Submitted: 09/09/2016 07:43 AM

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Sean Cleary and Stephen Foerster wrote this case solely to provide material for class discussion. The authors do not intend to

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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 concerning the...