Suppose that 5-years ago Alcoa Inc. purchased a manufacturing property for $3 million with an interest-only loan. The property has a current market value of $4 million. Alcoa wants to raise about $1.5 million in working capital to replace the an old chemical reactor. The property can be sold to W.P. Carrey (a REIT) and leased back to Alcoa for 15 years with an annual triple-net lease. The property is expected to be worth $5 million at the end of the 15 years. These and all other details of the transaction are in tab "Scenario 2." What are the funds released from the sale-leaseback effectively costing Alcoa? (Note: Canvas can't handle "%" signs. If your answer is 10.02%, just type 10.02) Alcoa can issue corporate debt at 13.0%. Based on this fact and your answer to to the previous question, should Alcoa do the sale-leaseback or issue debt? issue debt sale-leaseback Question 36 0.5 pts What is implied about Alcoa's credit risk that it can get a mortgage at a lower interest rate (10%) than it can issue debt (13%)? Alcoa's corporate assets must be viewed as lower risk than the real estate property Alcoa's corporate assets must be viewed as higher risk than the real estate property Why might Alcoa benefit from doing a sale-leaseback on just the land instead of the entire property? To be able to keep the same depreciation deduction as before the sale-leaseback. To increase its DCR above 1.2 in order to qualify for a larger mortgage loan. To reduce its property tax liability by no longer owning the land. To preserve control over the building, which is highly specialized for Alcoa's production lines. Question 38 1 pts What questions and factors should W.P. Carey consider before purchasing and leasing back Alcoa's property? (Select all that apply) Criticality of the asset. Is it incredibly important to Alcoa's operations? So, if they run into problems, will Alcoa continue to need that facility? Credit quality of Alcoa. Will they be around for the next 15 years to pay rent. The quality of the real estate, location, age, facilities. What can we do with the property if Alcoa defaults? The present value of the maintenance, property taxes, and insurance costs associated with ownership of the property for the next 15 years