Question

Suppose a company owns a warehouse that costs $500,000 and depreciates at $10,000 per year. If the interest rate is 5%, what is the implicit rental price of the warehouse

Answer 1

Answer: $35,000

Step-by-step explanation:

Implicit rental price = Interest payment + Depreciation

Interest payment = 5% * 500,000

= $25,000

Implicit rental price is therefore:

= 25,000 + 10,000

= $35,000