Your grandfather bought a piece of land 75 years ago and built a small warehouse. Currently, according to your grandfather's will, the warehouse has been endowed to you. You intend to lease it to tenants and receive lease income forever. You just leased the place to a client and the first today lease payment of ₹ 150000 is made at the end of the year. The payments increase at a rate of 5% forever. The agreement with the client is for 10 years. You can re-negotiate the lease at the end of 10 years or rent it to another client. At a discounting rate of 12%, what must be the minimum acceptable lease payment?

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To determine the minimum acceptable lease payment we need to calculate the present value of the lease payments using the discount rate of 12 Since the ... View the full answer