The lease on the premises occupied by the accounting firm of Heath and Company will soon expire. The current landlord is offering to renew the lease for seven years at $2100 per month. The developers of a new building, a block away from Heath's present offices, are offering the first year of a seven year lease rent-free. For the subsequent six years the rent would be $2500 per month. All rents are paid at the beginning of each month. Other things being equal, which lease should Heath accept if money is worth 7.5% compounded monthly?

Question

Quizplus · Accepted Answer

The Answer of The lease on the premises occupied by the accounting firm of Heath and Company will soon expire. The current landlord is offering to renew the lease for seven years at $2100 per month. The developers of a new building, a block away from Heath's present offices, are offering the first year of a seven year lease rent-free. For the subsequent six years the rent would be $2500 per month. All rents are paid at the beginning of each month. Other things being equal, which lease should Heath accept if money is worth 7.5% compounded monthly?

The Lease on the Premises Occupied by the Accounting Firm