Question

1. Problem 11.18 Click here to read the eBook: Net Present Value (NPV) Click here to read the eBook: Internal Rate of Return (IRR) NPV AND IRR 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 $2,700 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.) -Select- 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 leases? (Hint: Find PV of the old lease's original cost att9; then treat this as the PV of a 51-period annuity whose payments represent the rent during months 10 to 60.) Round your answer to the nearest cent. Do not round your intermediate calculations. 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.) Round your answer to two decimal places. Do not round your intermediate calculations. ERM Grade i New Save & Comme Continue without ang MacBook Pro

Answer 1

ADRY kase peied WA 210 pauu RoD 0.0) (10.041) 60 A... -l0 2 too 40-0) +20 1t0-0)) - 2 20001) +o) +(1.0) .. 2700 D15 iz 13 19 20

- 60 H01) 1-401) |१৪০: 2 X ৩:4५१ do 97282.13 8 32.12 \e এ২. Ne lease to

d le Amaut be T NPV=D 1990.2 x0.44 P (o1) P1930.2 XD 4Y9) 0 378 lo -00 -00 Caul 10

d Mauger e ind Corts ereu ce - ) 2 Qooo 1 200 +o (14) - 66 = dooo Cta) 1 (14) -G 7()-) \1-eni)} - (1+9) 1 - () 0(14-01)1- - (140) 10 15 20

no)=/r) G41) 4 1 (9ry - So Dolai)"-24 (441)50 ३.(७१)" - 2+ ( -+0 1 1.D2488 =0248=>4