3. The owner/operator of Hotel Heritage is considering leasing the hotel to another management company for five years. He is offering two lease options: flat monthly lease and a variable lease based on the sales of the different departments for the next five years. The following are the hotel sales records for the last year and the two lease proposals (15 points): Sales Rooms Food Tele Misc Total 4,500,000 800,000 50,000 50,000 5,400,000 Proposal A Payment = $60,000 per month Interest rate (k) = 1% per month Proposal B Total Sales Past yr Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 5,400,000 6,480,000 7,776,000 9,331,200 11,197,440 13,436,928 Rooms 83.33% 4,500,000 5,400,000 6,480,000 7,776,000 9,331,200 11,197,440 Food 14.81% 800,000 960,000 1,152,000 1,382,400 1,658,880 1,990,656 Tele. 0.93% 50,000 60,000 72,000 86,400 103,680 124,416 Misc. 0.93% 50,000 60,000 72,000 86,400 103,680 124,416 Variable rent payment = 12% rooms sales, 3% food and 2% other telephone & miscellaneous) Cost of capital (k)= 12% Required: Determine the present values of the two options for the period of five years and make your recommendations to the hotel owner for the best proposal he should negotiate for the lease