Existing Lease requires payments of $2,100 per month with the first payment at the end of...

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Existing Lease requires payments of $2,100 per month with the first payment at the end of the month. The lease has five years (60 months) until it expires. . The interest rate used to discount things is 5%. The person running the retail shop has cash flow problems and makes a counteroffer $0 for 16 months • $600 for the next 8 months $4,000 for the final 36 months. Preliminary Question: where did the discount rate of 5% come from? Calculate the PV of the existing lease and the PV of the proposed lease. What monthly payment for the last 36 months would give us the same present value of the lease? Show all your work for all calculations. Existing Lease requires payments of $2,100 per month with the first payment at the end of the month. The lease has five years (60 months) until it expires. . The interest rate used to discount things is 5%. The person running the retail shop has cash flow problems and makes a counteroffer $0 for 16 months • $600 for the next 8 months $4,000 for the final 36 months. Preliminary Question: where did the discount rate of 5% come from? Calculate the PV of the existing lease and the PV of the proposed lease. What monthly payment for the last 36 months would give us the same present value of the lease? Show all your work for all calculations.

Answer rating: 100% (QA)

SOLUTION 1 The discount rate of 5 is typically used as a representation of the opportunity cost of capital which means it reflects the return that could be earned by investing the money elsewhere In f... View the full answer