A Property Owner Has Set Up a Contract in Which

Multiple Choice

A property owner has set up a contract in which he agrees to sell a warehouse 5 years from now to the tenant who currently leases the space. The tenant has agreed to continue to pay $20,000 in rent at the end of each year, including year five, at which time he will purchase the building for an additional $1,500,000. Assuming the required rate of return on a similar investment is 10% (annual) , how much is this deal presently worth to the original owner of the property?

A) $1,007,197.20
B) $1,014,779.29
C) $2,281,452.80
D) $2,293,663.00