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An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $17 per square foot with step-ups of $1 per year beginning one year from now. Required: a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) b. The owner of ATRIUM believes that the base rent of $17 per square foot in (a) is too low and wants to raise that amount to $21 with the same $1 step-ups. However, now ATRIUM would provide ACME a $51,400 moving allowance and $114,000 in tenant Improvements (TIS). What would be the net present value of this alternative to ATRIUM? c. ACME Informs ATRIUM that it is willing to consider a $20 per square foot with the $1 annual step-ups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $12 per square foot for 20,000 square feet per year. If ATRIUM buys out ACME's old lease, ACME will not require a moving allowance or Tls. What would be the net present value of this proposal to ATRIUM? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. Net present value of cash flows per square foot Required A Required B >

An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $17 per square foot with step-ups of $1 per year beginning one year from now. Required: a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) b. The owner of ATRIUM believes that the base rent of $17 per square foot in (a) is too low and wants to raise that amount to $21 with the same $1 step-ups. However, now ATRIUM would provide ACME a $51,400 moving allowance and $114,000 in tenant Improvements (TIS). What would be the net present value of this alternative to ATRIUM? c. ACME Informs ATRIUM that it is willing to consider a $20 per square foot with the $1 annual step-ups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $12 per square foot for 20,000 square feet per year. If ATRIUM buys out ACME's old lease, ACME will not require a moving allowance or Tls. What would be the net present value of this proposal to ATRIUM? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. Net present value of cash flows per square foot Required A Required B >

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 1P
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An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $17 per square foot with step-ups of $1 per year beginning one year from now. Required: a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) b. The owner of ATRIUM believes that the base rent of $17 per square foot in (a) is too low and wants to raise that amount to $21 with the same $1 step-ups. However, now ATRIUM would provide ACME a $51,400 moving allowance and $114,000 in tenant Improvements (TIS). What would be the net present value of this alternative to ATRIUM? c. ACME Informs ATRIUM that it is willing to consider a $20 per square foot with the $1 annual step-ups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $12 per square foot for 20,000 square feet per year. If ATRIUM buys out ACME's old lease, ACME will not require a moving allowance or Tls. What would be the net present value of this proposal to ATRIUM? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. Net present value of cash flows per square foot Required A Required B >
Transcribed Image Text:An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $17 per square foot with step-ups of $1 per year beginning one year from now. Required: a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) b. The owner of ATRIUM believes that the base rent of $17 per square foot in (a) is too low and wants to raise that amount to $21 with the same $1 step-ups. However, now ATRIUM would provide ACME a $51,400 moving allowance and $114,000 in tenant Improvements (TIS). What would be the net present value of this alternative to ATRIUM? c. ACME Informs ATRIUM that it is willing to consider a $20 per square foot with the $1 annual step-ups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $12 per square foot for 20,000 square feet per year. If ATRIUM buys out ACME's old lease, ACME will not require a moving allowance or Tls. What would be the net present value of this proposal to ATRIUM? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10 percent discount rate.) Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. Net present value of cash flows per square foot Required A Required B >
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