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?

- $651,234.54

Explanation:

Data provided in the question:

Cost of remodeling = $3.4 million = $3,400,000

Rent paid each year = $820,000

Duration, n = 5 years

Discount rate, r = 15% = 0.15

Now,

Present value of the amount rent paid each year = A ×

Here,

A = Rent paid each year

Thus,

Present value of the amount rent paid each year

= $820,000 ×

= $820,000 × 3.352153

= $2,748,765.46

Therefore,

Benefit = Present value of the amount rent paid - Cost of remodeling

= $2,748,765.46 - $3,400,000

= - $651,234.54

d) social security number

let me know if i am correct or not, so i can edit the answer.