DROP DOWN OPTION: (YES OR NO)
month.
mall's own
time to be high so that the property will be 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 $2,500 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? (Hint: Be sure to use 1% per month.)
rqaq suaayipu! Joumo arogs ayg syew pjnom quaw/ed aseej Mau geyi "quaw/hed asegj mau aya samo saumo s,jew aya ve/m u:ebueq ce pap:>ap seumo auogs as jt *q n th old leases? (Hint: Find FV of the old lease's original cost at t = 9; then treat this as the PV of a 51-period annuity whose payments represent the rent during months 10 to 60.) Do not round intermediate calculations. Round your answer to the nearest cent.
5
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 leases? (Hint: Calculate the differences between the two payment streams; then find its IRR.) Do not round intermediate calculations. Round your answer to two decimal places. %