A store has 5 years remaining on its lease in a mall. Rent is $2,000 per month, 60 payments remain,

3 answers
Question:

A store has 5 years remaining on its lease in a mall. Rent is $2,000 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year and wants rent at that time to be high so that the property will appear more valuable. Therefore, the store has been offered a "great deal" (owner's words) on a new 5-year lease. The new lease calls for no rent for 9 months, then payments of $2,750 per month for the next 51 months. The lease cannot be broken, and the store's WACC is 12% (or 1% per month). A) Should the new lease be accepted ?
B) If the store owner decided to bargain with the mall's owner over the new lease payment, what new lease payment would make the store owner indifferent between the new and old lease ?
C) The store owner is not sure of the 12% WACC- it could be higher or lower. At what nominal WACC would the store owner be indifferent between the two lease ?

Answers

Explanation:

Uhh

Solution:

Sum      Present value of 60 payments

             Rent                                              2000

            Periods                                           60

            Rate                                                 12%

        Present value of 60 payments    $94,405 (Excel = PV( 1% , 60 , 2000))

       Future value of these payments at t=9

       Future value                                   $1,03,249.99(Excel=FV(1%,9,94,405)

       Periods                                              51

        Rate                                                 12%

This mad absolutly no sense

Explanation:

clarify and i can help more

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