Nine years later with 46 years remaining on the original lease term the following changes occur

First, the lease term is extended 5 years. Second, a third fixed rent period is added and rent for this period is $300. Third, the extended term of the lease is now 51 years (46 years remaining on original lease plus 5 year extension of lease). Solution: Since the rent is increased for the last 25 years of the lease, capitalize the difference in the rent for this portion of the lease. 46 year factor minus 26 year factor times the net difference between the new fixed rent and the old fixed rent (15.524 - 13.003) X ($300 - $250) 2.521 X $50 = $126.05 51 year factor minus 46 year factor times new fixed rent (15.583 - 15.524) X $300 0.059 X $300 = $17.70 $126.05 17.70 Total capitalized rent $143.75 Note: The factors used are based on the Inwood Table, the present worth of one per annum. One uses the compound interest table which deals with the present value of an ordinary annuity. [THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]