Question 1: Part A 1 of 2 The Ghirardelli Chocolate Co. rents several small retail units from Stratford Developments Corp as part of its new concept Sugar-Rush Cakeshop, which it hopes will help revive the company's fortunes in the face of declining sales. Juan Rosas shopping centre has recently had a rent review, and the rent has been agreed at 315,000 per annum. The Ghirardelli Chocolate Co. has proposed that the rent should henceforth be payable monthly in advance rather than quarterly in advance as at present for the remainder of the lease, which is 8 years. The all risks yield for retail properties in this locality is 6.25%. Value the 8 years of the term remaining for Juan Rosas shopping centre on behalf of Stratford Developments Corp on the assumption that the rent is payable: 1. Annually in arrears 2. Quarterly in advance

Question 1: Part A 1 of 2 The Ghirardelli Chocolate Co. rents several small retail units from Stratford Developments Corp as part of its new concept Sugar-Rush Cakeshop, which it hopes will help revive the company's fortunes in the face of declining sales. Juan Rosas shopping centre has recently had a rent review, and the rent has been agreed at 315,000 per annum. The Ghirardelli Chocolate Co. has proposed that the rent should henceforth be payable monthly in advance rather than quarterly in advance as at present for the remainder of the lease, which is 8 years. The all risks yield for retail properties in this locality is 6.25%. Value the 8 years of the term remaining for Juan Rosas shopping centre on behalf of Stratford Developments Corp on the assumption that the rent is payable: 1. Annually in arrears 2. Quarterly in advance

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter5: Making Automobile And Housing Decisions

Section: Chapter Questions

Problem 2FPE: Lease ersus purchase car decision. use wor sheet 5.1. Everett Adams is trying to decide whether to...

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QUESTION 5.2 Europcar, a leading South African car rental company, wants to determine whether to purchase or lease a fleet of Toyota Yaris motorcars for rental purposes. The company is in the 28% tax bracket and its after-tax cost of debt is currently 7%. Lease contract The lease contract determines that the company could lease the fleet of Toyota Quest cars for three years at a lease rental of R295 000 payable at the end of each year. All maintenance costs would be paid by the lessor. Insurance and other costs would be borne by the lessee. Purchase option The purchase option allows the company to purchase the fleet of Toyota Quest cars for R900 000 and to finance it entirely with an 11% loan requiring annual end-of-year payment of R368 249 for three years. The fleet would be depreciated by R300 000 per year. Europcar would pay R5 000 per year for a service contract covering all maintenance costs and also bear insurance and other costs. Europcar’s financial manager asked Tim Joshua…
QUESTION 5.3 Europcar, a leading South African car rental company, wants to determine whether to purchase or lease a fleet of Toyota Yaris motorcars for rental purposes. The company is in the 28% tax bracket and its after-tax cost of debt is currently 7%. Lease contract The lease contract determines that the company could lease the fleet of Toyota Quest cars for three years at a lease rental of R295 000 payable at the end of each year. All maintenance costs would be paid by the lessor. Insurance and other costs would be borne by the lessee. Purchase option The purchase option allows the company to purchase the fleet of Toyota Quest cars for R900 000 and to finance it entirely with an 11% loan requiring annual end-of-year payment of R368 249 for three years. The fleet would be depreciated by R300 000 per year. Europcar would pay R5 000 per year for a service contract covering all maintenance costs and also bear insurance and other costs. Europcar’s financial manager asked Tim Joshua for…
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