Mi Ran Kim leases the building in which her restaurant is located. For the past five years,

she has paid rent of $5,000 per month. The lessor has proposed two alternative rental

payment plans for the next three years as follows:

1. Monthly rent of $5,000 per month for the first year, $5,200 per month for the second

year, and $5,400 per month for the third year.

2. Monthly rent of $4,000 per month and 1 percent of sales for each month for years 1-3.

Mi Ran forecasts her average monthly sales as follows:

Year Sales

1 $100,000

2 $120,000

3 $140,000

Required:

Calculate the total lease expense per year for each alternative.