Does the office renovation and subsequent lease agreement

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Now consider the uneven cash flow stream stemming from the lease agreement given in the case

A. What is the present ( Year o) value of the annual lease cash flows if the opportunity cost rate is 10% annually?

B. What is the future value of this cash flow stream at the end of year 5 if the cash flows are invested at 10% annually?What is the present value of this future value whan discounted at 10%? What does this result indicate about the consistency inherent in time value analyses?

C. Does the office renovation and subsequent lease agreement appear to be a good investment for the company? (Hint: Compare the cost of renovation with the present value of the lease payments. Use a 10 % discount rate for the analysis)

 

Reference no: EM13295004

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