1 Liu Ming Chuan, owner of the MCU Cafe, is negotiating with the lessor regarding the lease of the building for the next 5 years. 2 The lessor has proposed the following lease payment alternatives: 3 1. Monthly fixed lease payment of $1,000 + 3% of net sales 4 |2. Monthly variable lease payment of 6% of net sales. 7 Questions 8 (1). What is the indifference point among the two proposals 9 (2). If expected average annual net sale are $350,000. which lease payment alternatives should be recommended to Liu Ming Chuan? 10 (3). If expected average annual net sale are $500,000. which lease payment alternatives should be recommended to Liu Ming Chuan? 11 12 13 ANSWER 14 (1). indifference point = (number) 15 16 (2). Annual indifference point = (formula) 17 1. Annual lease expense using monthly mixed lease payment = (use numbers to write a formula) 18 2. Annual lease expense using monthly variable lease payment = (use numbers to write a formula) 19 Recommended lease payment? (choose 1 or 2) 20 21 (3). 1. Annual lease expense using monthly mixed lease payment = (use numbers to write a formula) 22 2. Annual lease expense using monthly variable lease payment = (use numbers to write a formula) 23 Recommended lease payment? (choose 1 or 2)