Loblaws, one of the leading grocery chains in Canada, maintains a number of storage facilities around the country to stock their various grocery stores. The grocer has now found it necessary to acquire one additional storage facility in the Greater Toronto Area (GTA). The owner of one storage facility has offered to lease space to the grocer, based on the following arrangement: Loblaws would assume total management of the facility and would pay $500,000 in advance for a 15-year lease. This arrangement would also require the company to pay the estimated $15,000 annual operating expenses. 

Assuming the company's cost of capital is 12%, calculate the present value of costs for this storage opportunity.

Answer rating: 100% (QA)

To calculate the present value of costs for this storage opportunity we will consider the initial pa... View the full answer