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2. Refer to Problem 1. Suppose that five years ago the corporation had decided to own rather than lease the real estate. Assume that
2. Refer to Problem 1. Suppose that five years ago the corporation had decided to own rather than lease the real estate. Assume that it is now five years later and management is considering a sale- leaseback of the property. The property can be sold today for $4,850,000 and leased back at a rate of $450,000 per year on a 15-year lease starting today. It was purchased five years ago for $4.5 million. Assume that the property will be worth $5.7 million at the end of the 15-year lease. a. How much would the corporation receive from a sale-leaseback of the property? b. What is the cost of obtaining financing with a sale-leaseback? c. What is the return from continuing to own the property? d. In general, what other factors and alternatives might the firm consider in order to decide whether to do a sale-leaseback?
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