2. . briefly explain four (4) typical clauses found in a standard lease. A retailer is presently leasing 12,500 sq. ft. of store space. His lease is up for renewal and his space is in immediate need of additional improvements at an estimated cost of $13,000. The location is good and the retailer needs the space for at least another 10 years. The landlord is offering the retailer two options for his continued occupation of the premises; 10-year lease with escalation in Year 6 10-year lease with a flat rate for the entire term Option 1 The rate for Year 1 of the lease will be made of the base rate of $9.00 per sq. ft. per annum plus an improvement amortization cost of $0.25 per sq. ft. per annum. The rate for Years 2-5 will be fixed at the same rate as Year 1. Cost of improvements will be amortized over the first 5 years of the lease. The rate for Year 6 will be calculated using the base lease rate for Year 1 and the growth of the Consumer Price Index (CPI) during the previous 5-year period. It is expected the CPI will grow at a rate of 2% per year, compounded annually. The rate for Years 7-10 will be fixed at the same rate as Year 6. Option 2 The rate for Year 1 of the lease will be made of the base rate of $10.00 per sq ft. per annum, plus an improvement amortization cost of $0.17 per sq. ft. per annum. The rate for Years 2-10 will be fixed at the same rate as Year 1. Cost of improvements will be amortized over the entire 10-year term. Assume that lease payments are made at the beginning of each year and that the retailer's discount rate is 6% per annum, compounded annually (j = 6%). The retailer has retained you to help him choose an option. Using discounted cash flow analysis, determine the present value of each lease alternative. Which alternative should he choose? Refer to your present value results in determining the best option. Briefly explain. TA