Question
La Fleur purchased the building in which their corporate office is housed on 1/1/20 for $4,200,000. They put down $900,000 cash and had to borrow
La Fleur purchased the building in which their corporate office is housed on 1/1/20 for $4,200,000. They put down $900,000 cash and had to borrow the remaining amount at 5% over a 20-year term. At the time of the purchase, they had the option to lease the building. The 20-year lease would begin on 1/1/20 and called for payments of $350,000 beginning on that date for the first 10 years and payments of $300,000 beginning on 1/1/30 for the remaining 10 years of the lease. La Fleur had the option to purchase the building for $1 on December 31, 2039 at the end of the lease. Did La Fleur make the right decision by purchasing the building? Why or why not? Show your work.
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