A store has 5 years remaining on its lease in a mall rent, Ask an Expert

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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". on a new 5-year lease. The new lease calls for no rent for 9 months, then payments of $2600 per month for the next 51 months. The least cannot be broken, and the stores WACC is 12%.

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 leases?

c. The store owner is not sure of the 12% WACC. At what nominal WACC would the store owner be indifferent between the two leases?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9882384

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