QUESTIONS Suppose the present value of the building equals its purchase price of S10 million. Assume that the law firm can finance the offices in London and Brussels from operating cash flow, with cash left over for the lease payments. The firm will not default on the lease payments. For simplicity you can ignore taxes 1. If the law firm takes the lease, it will invest $950.000 and, in effect. borrow $9,050.000, repoid by 19 installments of $950,000. What is the interest rate on this distused loan? 2. The law firm could finance 80% of the purchase price with a conventional mortenge at a 7% interest rate. Is the conventional mortgage better than the lease? 3. Construct a simple numerical example to convince Drywall that the lease would expose the law firm to financial risk. [HintWhat is the rate of cum on the futu's equity investment in the office building if a recession arrives and the market value of the leased) office building fulls to $9 million after one year? What is the rate of return with conventional morte financing? With all equity focis? 4. Do the investments in London and Brussels have anything to do with the decision to finance the office building? Explain briefly