Question

your store sales average 190,000 per month. you're a triple net lease has the following monthly term: rent is 5% of sales, Insurance is $300, maintenance is $75, Utilities total $300, and taxes are $120. You expect in your salary to increase 5% but your lease terms will remain the same. Calculate next years annual lease payment

Answer 1

Next years annual lease payments=$129,240

Step-by-step explanation:

Step 1: Determine next years salary

Since next year, the sales salary will have increase by 7%, we can determine next years annual sales as shown;

F=P(1+R)

where;

F=next years salary

P=this years salary

R=salary increase rate

In our case;

F=unknown, to be determined

P=190,000 per month

P=(190,000×12)=$2,280,000 annually

R=5%=5/100=0.05

replacing;

F=2,280,000(1+0.05)=$2,394,000

Step 2: Determine next years rent

Next years rent=0.05×2,394,000=$119,700

Step 3: Determine insurance, maintenance, utilities and total annual taxes

Total=annual insurance payments+annual maintenance payments+annual utilities payments+annual taxes

Total=(300×12)+(75×12)+(300×12)+(120×12)=$9,540

Step 4: Determine next years annual lease payments

Next years annual lease payments=next years rent payment+ insurance+maintenance+utilities+annual taxes

where;

next years rent payment=$119,700

insurance+maintenance+utilities+annual taxes=$9,540

replacing;

Next years annual lease payments=(119,700+9,540)=$129,240

Next years annual lease payments=$129,240