Asked by lebron james, Chicago, IL • Mon Jan 17, 2011
I am putting together a spreadsheet that has a very similar goal to the following new york times tool: http://www.nytimes.com/interactive/business/buy-rent-calcula
I'm doing this because I want to know exactly how the calculations work and also because we are currently assessing whether or not to rent or buy. My first question about the New York times tool is about the Lost Opportunity Costs section. I'm wondering if I really have to track this item in my spreadsheet. If I just take the Net Present Value of all cash inflows and outflows for both scenarios, won't the difference between the two numbers tell me what I need to know? For example, say the NPV of renting for 4 years is -$30,000 and the NPV of buying now and selling in four years is -$35,000. The diff would tell me that, over time, I would be saving what is equivalent to $5,000 today. Hopefully, this question makes sense.
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