Recall the three steps in calculating effective rent while working this problem. 1. Calculate net rent (base rent adjusted for operating expenses and recoveries). 2. Calculate the present value of the net rent for all years in the lease (the NPV function in Excel will do this). 3. You can then convert that into an equivalent level annuity payment, or effective rent payment. A property owner is evaluating the following alternatives for leasing space in his office building for the next five years: Triple Net lease with steps, Rent will be $15 per square foot the first year and will increase by $2.80 per square foot each year untli the end of the lease. All operating expenses will be paid by the tenant. Triple Net lease with CP ladjustments. The rent will be $17 per square foot the first year. After the first year, the rent will be increased by the amount of any increase in the CPI. The CPI is expected to increase 9 percent per year. Gross lease. Rent will be $31 per square foot each year with the lessor (property owner or landlord) responsible for payment of all operating expenses. Expenses are estimated to be $9 during the first year and increase by $1 per year thereafter. Gross lease with expense stop and CPl adjustment. Rent will be $27 the first year and increase by the full amount of any change in the CPI after the first year with an expense stop at $9 per square foot. The CPI and operating expenses are assumed to change by the same amount as outlined above. The only difference is the expense stop may result in the landlord recovering some of the operating expenses. Requitred: a. Calculate the effective rent per square foot to the owner (after expenses and other adjustments) for each lease alternative using a 11 percent discount rate. b. How would you rank the alternatives in terms of risk to the property ownen? Hint: The effective rent for each option is roughly: Option 1: $20.00 Option 2: $20.00 Option 3: $20.20 Option 4:$22.70 Complete this question by entering your answers in the tabs below. Calculate the effective rent to the owner (after expenses) for each lease alternative using a 11 percent discount rate. Note: Do not round your intermediate calculations. Round your final answers to two decimal places. Complete this question by entering your answers in the tabs below. How would you rank the alternatives in terms of risk to the property owner? Note: Rank the alternatives from the least risky to the most risky