Fred is considering the purchase of a lease that will allow him to operate a restaurant at the local airport for a period of five years. The lease will cost $33,522. Fred anticipates annual profits of $10,000. At what discount rate will Fred be indifferent between purchasing and not purchasing the lease; that is, what is the implied annual rate of return on the cost of the lease?

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The Answer of Fred is considering the purchase of a lease that will allow him to operate a restaurant at the local airport for a period of five years. The lease will cost $33,522. Fred anticipates annual profits of $10,000. At what discount rate will Fred be indifferent between purchasing and not purchasing the lease; that is, what is the implied annual rate of return on the cost of the lease?

Fred Is Considering the Purchase of a Lease That Will