A property owner is evaluating the following alternatives for leasing space in his office building for the next five years: Gross lease with expense stop and CPI adjustment. Rent will be $24 the first year and increase by the full amount of any change in the CPI after the first year with an expense stop at $9 per square foot. The CPI and operating expenses are followed: The CPI is expected to increase 5 percent per year. Expenses are estimated to be $9 during the first year and increase by $1 per year thereafter. Calculate the effective rent to the owner (after expenses) for the lease using a 10 percent discount rate. A) $21.60 B) $17.28 C) $22.46 D) $19.01

A property owner is evaluating the following alternatives for leasing space in his office building for the next five years: Gross lease with expense stop and CPI adjustment. Rent will be $24 the first year and increase by the full amount of any change in the CPI after the first year with an expense stop at $9 per square foot. The CPI and operating expenses are followed: The CPI is expected to increase 5 percent per year. Expenses are estimated to be $9 during the first year and increase by $1 per year thereafter. Calculate the effective rent to the owner (after expenses) for the lease using a 10 percent discount rate. A) $21.60 B) $17.28 C) $22.46 D) $19.01

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 3E

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