Your first option is to enter a leasing agreement with a former Anteater who runs an event planning company called Diamond Events. After describing the location and space to her, she is interested in renting it out to host a variety of events. To make this possible, you will have to renovate the space first, which will take time and money. Additionally, if Diamond Events were to lease the space, you and your team expect there to be an increase in repairs, maintenance, and utilities as well as a slight decrease in restaurant sales from an overall decrease in ambience from the additional event goers (loud partyers, congested parking lot, etc.). Diamond Events is willing to sign a 4-year lease with an annual rent of $84,000 in the first year, growing at 5% thereafter. The team's additional assumptions are given below in Exhibit 1; where the renovation cost is a one-time capital expenditure and the increase in repairs, maintenance, and utilities, is an annual cost. Note: All operating income are taxable, therefore operating expenses reduce the taxable income, while capital expenditures such as renovation costs and equipment costs are not tax deductible.

Exhibit 1: Leasing to Diamond Events Assumptions Project life 4 years Renovation cost 90,000 USD Tax rate 21% Cost of capital 13.00% Rental growth rate 5% Increase in repairs, maintenance, and utilities 15,000 USD Decrease in restaurant sales 8.0%

f. Sensitivity analysis

i. Construct a cost of capital sensitivity table for all valuation types with costs of capital ranging from 11% to 15% in increments of 0.5%. That is fill in the following chart: LEASE OPTION COST OF CAPITAL SENSITIVITY Cost of Capital 11.0% 11.5% 12.0% 12.5% 13.0% 13.5% 14.0% 14.5% 15.0% NPV

ii. Construct 3x3 NPV and IRR Sensitivity Analyses reflecting the following information LEASE OPTION NPV SENSITIVITY Increase in repairs, maintenance, and utilities 7,500 15,000 22,500 4% 8% 12%