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Show excel work, please. I rate An owner of the Atrium Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corp. for

Show excel work, please. I rate

An owner of the Atrium Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corp. for 20,000 rentable square feet of office space. ACME would like a base rent of $20 per square foot with step-ups of $1 per year beginning one year from now.

a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10% discount rate.)

b. The owner of ATRIUM believes that base rent of $20 PSF in (a) is too low and wants to raise that amount to $24 with the same $1 step ups. However, now ATRIUM would provide ACME a $50,000 moving allowance and $100,000 in tenant improvements (TIs). What would be the present value of this alternative to ATRIUM?

c. ACME informs ATRIUM that it is willing to consider a $23 PSF with the $1 annual stepups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $15 PSF for 20,000 SF per year. If ATRIUM buys out ACMEs old lease, ACME will not require a moving allowance or TIs. What would be the present value of this proposal to ATRIUM? How does it compare with the alternative in (b)?

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