A Lease Option Is a Clause That Grants an Option

question 15

Multiple Choice

A lease option is a clause that grants an option holder the right, but not the obligation, to renew the lease, cancel the agreement, relocate within a property, or even expand to adjacent space. The existence of these options in a leasing agreement:

• A) reduces the expected present value of lease cash flows to the owner
• B) increases the expected present value of lease cash flows to the owner
• C) does not impact the expected present value of lease cash flows to the owner
• D) causes the expected present value of lease cash flows to equal zero

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Definitions:

Energy Resource

Natural resources that can be converted into energy forms usable by humans, such as oil, coal, solar, and wind.

Salt Dome

A geological formation created when layers of salt are pushed upward by the weight of overlying rock, sometimes trapping oil and gas.

Fault Zone

A region of numerous, closely spaced faults where the Earth's crust has fractured and moved.

Unconformity

A gap in the geological record where rock layers have been eroded or never deposited, representing a period of non-deposition or erosion.