Professional Properties Is Considering Remodeling the Office Building It Leases

Multiple Choice

Professional Properties is considering remodeling the office building it leases to Heartland Insurance. The remodeling costs are estimated at $3.4 million. If the building is remodeled, Heartland Insurance has agreed to pay an additional $820,000 a year in rent for the next 5 years. The discount rate is 15 percent. What is the benefit of the remodeling project to Professional Properties?

A) -$651,233
B) -$489,072
C) $5,214
D) $128,399
E) $311,417