The A Company has decided to acquire a piece of equipment but has not yet decided to buy or lease. The lease payments would be $140,105 paid annually at the end of each year. If purchased at a cost of $400,000, the equipment would be financed with debt costing 0.10, which can be repaid at any time within the four-year period. The life of the equipment is four years. The lease is a firm commitment to make four payments. There is no salvage value. Should the firm lease or buy-borrow? There are no taxes.

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 $11 per square foot (PSF) 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% discount rate.) b. The owner of ATRIUM believes that base rent of $11 PSF in (a) is too low and wants to raise that amount to $15 with the same $1 step-ups. However, now ATRIUM would provide ACME a $53,000 moving allowance and $130,000 in tenant improvements (Tls). What would be the present value of this alternative to ATRIUM? c. ACME informs ATRIUM that it is willing to consider a $14 PSF with the $1 annual stepups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $6 PSF for 20,000 SF per year. If ATRIUM…

A property is available for sale that could normally be financed with a fully amortizing $82,000 loan at a 10 percent rate with monthly payments over a 25-year term. Payments would be $745.13 per month. The builder is offering buyers a mortgage that reduces the payments by 50 percent for the first year and 25 percent for the second year. After the second year, regular monthly payments of $745.13 would be made for the remainder of the loan term. Required: a. How much would you expect the builder to have to give the bank to buy down the payments as indicated? b. Would you recommend the property be purchased if it was selling for $5,000 more than similar properties that do not have the buydown available? Complete this question by entering your answers in the tabs below. Required A Required B How much would you expect the builder to have to give the bank to buy down the payments as indicated? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Down…

Yankee Construction agreed to lease payments of $762.79 on construction equipment to be made at the end of each month for six years. Financing is at 15% compounded monthly. a) What is the value of the original lease contract? b) If, due to delays, the first eight payments were deferred, how much money would be needed after nine months to bring the lease payments up to date? c) How much money would be required to pay off the lease after nine months?