1. A landlord has offered a tenant a 7-year lease with annual net rental payments of $23 per square foot in arrears. The appropriate discount rate is 8%. The tenant has asked the landlord to come back with another proposal, with a lower initial rent in return for annual step-ups of 3% per year. What new proposed starting rent, given the 7-year term and 3% step-ups, would make the landlord indifferent between the two contracts?

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