Suppose the Lease on a Certain Space Will Expire at the Beginning

question 22

Multiple Choice

Suppose the lease on a certain space will expire at the beginning of 2008. You believe that the probability of the existing tenant renewing is 50 percent. If he renews, you will need to spend only an estimated $5.00/SF to upgrade his space. If he does not renew, it will take $25.00/SF to modernize the space, even then you expect 6 months of vacancy. What expected cash flow forecast should you put in year 2008 of your pro-forma for this space, if you expect triple-net market rents on new leases in 2008 to be $20/SF?

• A) $17.50/SF
• B) $15.00/SF
• C) zero = .5(20-5)+.5(10-25).
• D) - $10.00/SF

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Definitions:

Genetics

The study of genes, heredity, and the variation of organisms.

Social Cognition

The study of how people process, store, and apply information about others and social situations, influencing understanding, attitudes, and behaviors.

Cognitive Dissonance

The psychological conflict resulting from holding two or more contradictory beliefs, values, or attitudes simultaneously.