The law firm of Saul Goodman and Associates must choose between two different leases for their...

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The law firm of Saul Goodman and Associates must choose betweentwo different leases for their new space. The first lease, Lease A,is a 5-year gross lease with a base rent of $36.25/sf. If rentswill increase by $1.00/sf each year and the cash flows from thelease are discounted at 6%, what is the corresponding effectiverent when evaluated from the tenant's perspective?
The second lease, Lease B, is a 5-year net lease with a baserent of $25/sf with expenses expected to be $10/sf in the firstyear. If rents will increase by $1.00/sf each year and expenses by5% a year, what is the corresponding effective rent from thetenant's perspective if cash flows are discounted at 6%annually?

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4.3 Ratings (612 Votes)

First Lease Initial Rent 3625sf Gradient 1sf Time5 years Rate 6 The payments can be split into 2 set of cashflow i Annuity of 3625 iiGradient of 1 Hence PV of Annuity A11rnr 362511656 362511065006 3625107473006 362502527006 15270 PV of See Answer

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The law firm of Saul Goodman and Associates must choose betweentwo different leases for their new space. The first lease, Lease A,is a 5-year gross lease with a base rent of $36.25/sf. If rentswill increase by $1.00/sf each year and the cash flows from thelease are discounted at 6%, what is the corresponding effectiverent when evaluated from the tenant's perspective?The second lease, Lease B, is a 5-year net lease with a baserent of $25/sf with expenses expected to be $10/sf in the firstyear. If rents will increase by $1.00/sf each year and expenses by5% a year, what is the corresponding effective rent from thetenant's perspective if cash flows are discounted at 6%annually?