23 I have a 5,200 square foot tenant space that I am trying to lease at...

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23 I have a 5,200 square foot tenant space that I am trying to lease at one of our centers. Three tenants have expressed an interest in leasing the space. Two of the tenants require some upfront money from us to move in, while the third tenant does not. This third tenant, however, will not pay as much in rent as the other two. Details on the projected rents from the tenants and the amounts we are to invest upfront are shown below. Using any one of the 3 primary capital budgeting analysis methods (NPV, IRR and/or MIRR) you feel is best and most appropriate, evaluate the three tenants and tell me which of the three tenants I should pursue. My cost of capital is 9.0%. Be sure to show me how you arrived at your conclusion using the tools of Excel. You can use this spreadsheet to set up your calculations if you so desire. As a second part to this for 10 points, describe what you would have needed to do to determine the best Tenant if one tenant was goiing to lease the space for only four 4 years and the other two were going to lease for 7 years? 5 Cost of Capital: 9.0% 8 Tenant 1-Fivebucks Coffee and Tea H86879 9 nitial upfront cost ($100,000) Year 1 rents: $80,000 Year 2 rents: $95,000 Year 3 rents: $100,000 Year 4 rents: $105,000 Year 5 rents: $120,000 10 11 12 13 14 15 16 17 Tenant 2-CheeseBurger King 18 nitial upfront cost ($40,000) Year 1 rents: $75,000 $75,000 $75,000 Year 2 rents: Year 3 rents: Year 4 rents: Year 5 rents: $75,000 $75,000 2288823 19 20 21 PROBLEM - CAPITAL BUDGETING (30 POINTS) 24 25 26 Tenant 3-Old McDonalds 27 nitial upfront cost 28 Year 1 rents 29 30 31 32 33 Year 2 rents: Year 3 rents: Year 4 rents Year 5 rents $0 $65,000 $70,000 $75,000 $80,000 $85,000 23 I have a 5,200 square foot tenant space that I am trying to lease at one of our centers. Three tenants have expressed an interest in leasing the space. Two of the tenants require some upfront money from us to move in, while the third tenant does not. This third tenant, however, will not pay as much in rent as the other two. Details on the projected rents from the tenants and the amounts we are to invest upfront are shown below. Using any one of the 3 primary capital budgeting analysis methods (NPV, IRR and/or MIRR) you feel is best and most appropriate, evaluate the three tenants and tell me which of the three tenants I should pursue. My cost of capital is 9.0%. Be sure to show me how you arrived at your conclusion using the tools of Excel. You can use this spreadsheet to set up your calculations if you so desire. As a second part to this for 10 points, describe what you would have needed to do to determine the best Tenant if one tenant was goiing to lease the space for only four 4 years and the other two were going to lease for 7 years? 5 Cost of Capital: 9.0% 8 Tenant 1-Fivebucks Coffee and Tea H86879 9 nitial upfront cost ($100,000) Year 1 rents: $80,000 Year 2 rents: $95,000 Year 3 rents: $100,000 Year 4 rents: $105,000 Year 5 rents: $120,000 10 11 12 13 14 15 16 17 Tenant 2-CheeseBurger King 18 nitial upfront cost ($40,000) Year 1 rents: $75,000 $75,000 $75,000 Year 2 rents: Year 3 rents: Year 4 rents: Year 5 rents: $75,000 $75,000 2288823 19 20 21 PROBLEM - CAPITAL BUDGETING (30 POINTS) 24 25 26 Tenant 3-Old McDonalds 27 nitial upfront cost 28 Year 1 rents 29 30 31 32 33 Year 2 rents: Year 3 rents: Year 4 rents Year 5 rents $0 $65,000 $70,000 $75,000 $80,000 $85,000

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To evaluate the three tenants and determine which one to pursue we can use the Net Present Value NPV ... View the full answer