Graduate level step-by-step solution with explanation
Question: A couple plans to purchase a home for $250,000. Property taxes are expected to be $1,900 per year while insurance premiums are estimated to be $700 per year. Annual repair and maintenance is estimated at $1,400. An alternative is to rent a house of about the same size for $1,500 per month (approximate using $18000 per year) payments. If an 8.0% return before-tax is the couple's minimum rate of return, what must the resale value be 10 years from today for the cost of ownership to equal the equivalent cost of renting? Including the resale value, what is the equivalent annual cost of owning the home?