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Keith_Richards [23]
3 years ago
15

A building owner is evaluating the following alternatives for leasing space in an office building for the next five years:

Business
1 answer:
Leno4ka [110]3 years ago
4 0

Answer:

Explanation:

The lease rent that depends  upon CPI rate and operating expenses has more risk than normal increase in value rent alternatives. Reason being that CPI can be increased or decreased in future and this will affect the builder's cashflow.

Likewise, operating expense is also an increase or decrease because the builder's cashflow can increase or decrease .

The risk level of all the four alternatives is shown below

Net lease with steps- Less risky

Net lease with CPI - Highly risky

Gross lease - Moderately risky

Gross lease with CPI - Highly risky

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