A company is planning to move to a larger office and is trying to decide if the new office should be owned or leased.Cash flows for owning versus leasing are estimated as follows.Assume that the cash flows from operations will remain level over a 10 year holding period.If purchased,the company will invest $385,000 in equity and finance the remainder with an interest-only loan that has a balloon payment due in year 10.The after-tax cash flow from sale of the property at the end of year 10 is expected to be $750,000.What is the incremental rate of return on equity to the company,if the property is owned instead of leased?

Question

Quizplus · Accepted Answer

The Answer is B

A Company Is Planning to Move to a Larger Office