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The Jefferson City Council is contemplating selling a building that is currently leased to Dr. Tarria Whitley, a local veterinarian, for $95,000. Whitley leases the
The Jefferson City Council is contemplating selling a building that is currently leased to Dr. Tarria Whitley, a local veterinarian, for $95,000. Whitley leases the building for $900 per month and is currently on a six year annually renewed lease with the option to buy the property at the close of the lease for $45,000. Using the present value formula and a 6% discount rate, calculate the total benefit of the leasing option and compare it with the option to sell the property. Should the city sell the building or continue to lease it? Long Hand Method PV = Annual value : [(1:Discount Rate)nth power - 1] / Discount rate (1-DR Inth power Annual Benefit = One Time Benefit = PV Annual Benefit $10,800.00 $45,000.00 3 PV One Time Benefit 0 1 2 3 Total Benefit = 24 5 26 27 28 29 30 Annual Benefit = 31 One Time Benefit = 32 PM Annual Benefits 3.5 34 Py One Time Benefit 55 36 Total Benefit ST Short Hand Method 38
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