Alternative uses of space

Seven years ago the Star Department Store began leasing space to Clothes Horse. Inc.. a chain of boutique specializing in high priced women's clothing and accessories. Thin boutiques are usually separate stores in shopping centers. but the management of Clothes Horse wished to experiment with an operation in a department store and Star was willing. Is the space was not then needed for its own operations.

Clothes Horse says Star a monthly rental of $$3,000$ plus $5\%$ of its gross sales, and the arrangement has been profitable for both parties. Star pays all electricity, gas, and other costs of occupancy, which are negligible when considered incrementally because the space would have to be lighted and heated anyway. The lease is about to expire, and Clothes Horse is eager to renew it for another year on the same lerms. However. some of Star's department heads have indicated a desire to take over the