Q:X company takes on a five year lease of a building for which it pays $27,200 as a lump sum payment.X company then sub-lets the building for five years at a fixed annual rent,with the rent payable annually in arrears. What is the annual rental charge,if the rent is set at a level that will earn a DCF yield of 17% for X company?
Cumulative discount factor at 17% years 1-4=2.743
Cumulative discount factor at 17% years 1-5=3.199 A)$5,440 B)$8,502 C)$9,916 D)$87,013
According to kaplan the right answer is B but i don,t know how they reached that answer ?