Question
A landlord has offered a tenant a 20-year lease with annual net rental payments of $50 per square foot paid in arrears (payments stay the
A landlord has offered a tenant a 20-year lease with annual net rental payments of $50 per square foot paid in arrears (payments stay the same, no growth). The appropriate discount rate for this transaction is 10%. The tenant has requested the landlord to consider an alternative proposal that begins with a lower initial rent but includes annual rent increases of 5%. What should be the initial rent in the alternative proposal for the landlord to be indifferent between the two options (assuming that the discount rate remains the same in both cases)?
?
$43.71 | ||
$46.80 | ||
$40.73 | ||
$35.14 | ||
$37.88 |
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