Determine the total cost to the lessee of the following lease proposal on an office building, for the third year:
Monthly rent Energy Costs Repairs Building Insurance
8% of Revenue Paid by Lessee Paid by Lessor Paid by Lessee
The average monthly revenues over the ten-year lease period are expected to start at $494,000 and increase by $5,000 each year. The estimated monthly costs for energy are expected to be $100 in the first year and increase by $700 each year. The estimated annual costs for repairs are expected to be $6,000 in the first year and increase by $200 each year. The building insurance is expected to be $5,000 in the first year and increase by $500 each year. Express your answer in whole dollars, do not use dollar signs or commas in your answer.
MONTHLY RENT ENERGY COSTS REPAIRS
475840 9000 12200
BUILDING INSURANCE 23000 Revenues 5948000 Rental Rate 8% 5710080 507840
800 1500 2200 2900 3600 4300 5000 5700 6400
Revenues
5000
Annual Increase
12 5928000 5933000 5938000 5943000 5948000
494000
494416.6667 494833.3333 495250 495666.6667
1 2 3 4 5
496083.3333 496500 496916.6667 497333.3333 497750 Monthly
6 7 8 9 10
5953000 5958000 5963000 5968000 5973000 Yearly Energy 700 increase annual
100
800 1500 2200 2900 3600 4300 5000 5700 6400
1 2 3 4 5 6 7 8 9 10
1200 1900 2600 3300 4000 4700 5400 6100 6800 7500
Repairs
200 increase 1 2 3 4 5 6 7 8 9 10
insurance
500 increase
6000
6200 6400 6600 6800 7000 7200 7400 7600 7800
5000
5500 6000 6500 7000 7500 8000 8500 9000 9500
3
(Points: 3.75) Fidencio Lopez, owner of Fido's Pizzaria, has just signed a lease contract for several major machines (ovens and so forth). The lease required an initial payment of $12,400 when the lease was signed and five future payments of $12,700 each at one-year intervals. The restaurant's incremental interest rate is 10%. Mr. Lopez's accountant has determined that the lease must be capitalized. What is the total amount of the capitalized lease? Express your answer in whole dollars, do not use dollar signs or commas. total lease interest years
use time value of money/ cash flows
-5938000 8 3
-142512000
############
4
The Jerusalem Inn has just leased a new computer as of January 1, 2003. The terms of the contract allow the lessee to buy the computer for $4,400 at the end of the lease five years hence. ABC Computer's salesperson believes the computer would have a fair market value of $13,100 at the end of the lease period.
Other lease terms are as follows: Estimated useful life of computer 8 years Incremental cost of debt 15 percent Average cost of debt 12 percent
Quarterly lease payments are due at the beginning of each threemonth period starting on April 1, 2003. Quarterly payments inclusive of insurance $ 8,500 Quarterly insurance cost $ 700 Fair market value $ 12,400 The lessor's inplicit interest rate is 9% for this venture. What is the value of the computer equipment that should be capitalized?
25475.4 127377 4 5 20 -1 90% 0.1 4 132279.2602 15873.51122 7800 31200 156000 7800
-116406
1950
1 4 0.09
-3.24 -4.239719877 4.239719877 560827.0086
12400 11160 549667.0086 65960.04104 538507.0086 549667.0086 132279.2602 127377 4902.260164 422290.0086