Question
The Jefferson County Council is contemplating selling a building that is currently leased to Dr. Tarria Whitley, a local veterinarian, for $95,000.00. Whitley leases the
The Jefferson County Council is contemplating selling a building that is currently leased to Dr. Tarria Whitley, a local veterinarian, for $95,000.00. Whitley leases the building for $900.00 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 $45,000.00. 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.
| 4. Discounting to the PV | ||||||
| PV = Annual value x [(1+Discount Rate)nth power -1] / Discount rate (1+DR)nth power | ||||||
| Annual Benefit = | $10,800.00 | |||||
| One Time Benefit = | $45,000.00 | |||||
| PV Annual Benefit | ||||||
| PV One Time Benefit | ||||||
| Total Benefit = | ||||||
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International Financial Reporting And Analysis
Authors: David Alexander, Ann Jorissen, Martin Hoogendoorn
8th Edition
978-1473766853, 1473766850
