As a buyer and landlord, you can obtain one of two lease options. The first option gives you rent escalations of 2% per year after the first year for nine more years. The second option will have no rent escalations until the fourth year, at which point there will be a rent increase that year (in year four) of 6%. Then you will obtain 2.5% escalations for the reminder of the ten years. You will sell your property at a 7% cap rate (ignore closing costs, etc.) at the end of the seventh year and it is an absolute triple net lease. Assume rent in year one is 100,000 and your discount rate is 13%. What is the different in NPV between the two lease options if the purchase price was $1,000,000.

• .A 7,896
• B. 9,861
• C. 8,456
• D. 7,456
• E. 6,753