Ben is a property investor. He is choosing between the two properties (assume he will pay cash, but can only afford one of them).
Property A costs $1.2 million. Rent is $36,000 per annum (for simplicity, assume that all rent is paid at the end of the year). He will hold this property for three years, and sell it for $1.4 million.
Property B costs $1.4 million. Rent is $40,000 per annum, and after 3 years it will be sold for $1.62 million.
Assuming a discount rate of 5%, which property should Ben purchase?