Question
Exhibit 1: Leasing to Diamond Events Assumptions Project life 4 years Renovation cost 90,000 USD Tax rate 21% Cost of capital 13.00% Rental growth rate
Exhibit 1: Leasing to Diamond Events Assumptions Project life 4 years Renovation cost 90,000 USD Tax rate 21% Cost of capital 13.00% Rental growth rate 5% Increase in repairs, maintenance, and utilities 15,000 USD Decrease in restaurant sales 8.0%
f. Sensitivity analysis
i. Construct a cost of capital sensitivity table for all valuation types with costs of capital ranging from 11% to 15% in increments of 0.5%. That is fill in the following chart: LEASE OPTION COST OF CAPITAL SENSITIVTY Cost of Capital 11.0% 11.5% 12.0% 12.5% 13.0% 13.5% 14.0% 14.5% 15.0% NPV
ii. Construct 3x3 NPV and IRR Sensitivity Analyses reflecting the following information LEASE OPTION NPV SENSITIVITY Increase in repairs, maintenance, and utilities 7,500 15,000 22,500 4% 8% 12%
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