Question: 1. Provide a case synopsis/case introduction for class members so that you frame the situation for them IN DETAIL. 2. Provide a thorough explanation of

1. Provide a case synopsis/case introduction for class members so that you frame the situation for them IN DETAIL.

2. Provide a thorough explanation of Bill Nichols claim that the maximum value to Hasperat of the purchase option is $113,450. Explain how Nichols derived this value, with emphasis on his expected future cash flow and the discount rate he used.

3. Provide a critique of Nichols valuation method. Nichols used a DCF, applying a discount rate to a future cash flow. Your critique should include a discussion of what is wrong with his ASSUMPTIONS and TECHNIQUE.

4. Formulate an approach to correctly value the purchase option specified in the lease at the time of the case. Assume the option can be exercised after years 1, 6, 11 or 16. What additional assumptions must you make to conduct this analysis. Estimate the value of the option to Hasperat.

5. Compare the value of the purchase option you calculated to the value of ELIMINATING the option to Koenig. Assume Koenig will borrow $10MM against value of the Kelley Building permanently. Comment on whether a lease negotiation is likely to be successful.

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