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Now consider the uneven cash flow stream stemming from the lease agreement given in the case.

a. What is the present (Year 0) value of the annual lease cash flows if the opportunity cost rate is 10.0 percent annually?

b. What is the future value of this cash flow stream at the end of Year 5 if the cash flows are invested at 10.0 percent annually? What is the present value of this future value when discounted at 10.0 percent? What does this result indicate about the consistency inherent in time value analyses?

c. Does the office renovation and subsequent lease agreement appear to be a good investment investment for the company? (Hint: Compare the cost of renovation with the present value of the lease payments. Use a 10 percent discount rate for the analysis.)

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Category:- Basic Finance
Reference No.:- M9874305

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