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# STRATEGIC FINANCIAL MANAGEMENT

MBA 1 A

ASSIGNMENT

PRESENTED TO:

NPV Analysis.xls

Sheikh Saeed

19 AUGUST 2009

## LONDON SCHOOL OF COMMERCE

QUESTIO, 1: ............................................................................................................................................... 1
PRESENT VALUE CALCULATION ................................................................................................................. 1
Explanation: .......................................................................................................................................... 1
QUESTIO, 2 ................................................................................................................................................ 3
QUESTIO, 3: ............................................................................................................................................... 3
PART 1: FI,A,CIAL A,ALYSIS..................................................................................................... 4
%PV METHOD...................................................................................................................................... 4
IRR of the Differential ........................................................................................................................... 5
Discount Rate Sensitivity....................................................................................................................... 6
Why to rely on %PV and IRR?............................................................................................................... 7
CONCLUSION: ............................................................................................................................................. 8
PART 2: CRITICAL ISSUES.............................................................................................................. 9
CAPITAL RATIONING................................................................................................................................... 9
Hard Capital Rationing......................................................................................................................... 9
Soft Capital Rationing:.......................................................................................................................... 9
Operating Lease .................................................................................................................................. 10
Financial Lease ................................................................................................................................... 10
REAL ESTATE SPECIFIC ISSUES .................................................................................................................. 10
Leasing/Renting a Real estate ............................................................................................................. 10
Benefit of choosing Leasing (Option 3)............................................................................................... 12
WACC AND LEVERAGE ............................................................................................................................ 13
WACC (Weighted Average Cost of Capital)........................................................................................ 13
Leverage.............................................................................................................................................. 14
The Effect of Financial Leverage ........................................................................................................ 14
INFLATION ................................................................................................................................................ 15
REFERE,CES............................................................................................................................................ 16
Question 1:
Present Value Calculation
To calculate present value (PV) of any future payoffs (cash flows), we discount it by the
equivalent investment rate of return offered in capital market. This rate is called discount
rate or the opportunity cost of the capital. Present values of Cash Flows (after tax), of
each project 1, 2 & 3 are as follow:

FIGURE 1

Explanation:

The column under project’s cash flows in Figure 1 above, represent Incremental cash
flow of the projects, i.e. the savings made specifically due to the of project. The only cash
flows of the project are initial capital investment and residual value. (ACCA; 2006)

According to the financial principles, the project’s cash flows starts just after the project’s
initial investment (i.e. the capital investment), therefore, the present value calculation are
discounted to years 0 instead of ‘end of years’ which represent accounting year. The
following representation explains the criteria for calculating present value of cash flows.
This is illustrated in Figure 2.

1
FIGURE 2
Years from
Project Option 1: PV of Purchase without Finance
Launch
0 Initial Capital Investment + PV of Purchase without Finance

## 9 Relevant Benefits (Rental Savings) + Residual Value

FIGURE 3

FIGURE 4

2
Question 2

Net Present Value (NPV) is the difference between present values of cash INFLOWS and
Present values of cash OUTFLOWS of an investment or project. Or;

## NPV = Present values of all Cash Flows – Initial Investment

Or

Where, C is the cash flow at future time t, discounted at the opportunity cost of r.
relevant cost and benefits of the project must also be included in calculating PV of cash
flows.

The NPV for the project option 1, 2 & 3 are calculated below using Figure 1, 3 & 4.

FIGURE 5

Question 3:
The answer to the cost effectiveness of the projects of mutually exclusive nature lies in a
thoughtful assessment of numerous subjective questions and a thorough objective
analysis of the cash flows of the option available. In our cost analysis we are assessing
three possibilities of acquiring a building for business use. The options are financing
project with equity, part-financing with 30% equity and 70% through borrowing and
lease renting the building.

The decision to own, part-finance or lease is often driven by the cash and space needs of
the business; whether the space is retail, office, industrial, mixed use, or special use; the

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importance of branding, protecting, or creating trade areas; establishing franchise value;
or other circumstances.

## Comparison of cost effectiveness of real estate projects requires evaluation of each

alternative on the basis of financial outcomes as well as its advantages and disadvantages
attributed due to the nature of use. The first part of our cost efficiency analysis will be
based on financial examination to evaluate the cost effectiveness of project alternatives
(option 1 to 3). Second part will focus on the other issues particularly associated with
owning and leasing building for business use.

## PART 1: Financial Analysis

The two methods of comparing project cost effectiveness are the net present value (NPV)
method and the internal rate of return (IRR) method. IRR measures the profitability of the
project. It is an internal rate of return in the sense that it depends only on the project’s
own cash flows. The opportunity cost of capital is the standard for deciding whether to
accept the project. It is equal to the return offered by equivalent-risk investments in the
capital market. As IRR method is considered to be less reliable for investment decision,
its use in incremental cash flow analysis is somewhat recommended to further strengthen
the decision based on NPV method. The IRR of the differential of mutually exclusive
projects allow us to compare them with respect to inherent initial investment disparities
among them. (Brealey et al; 2006)

,PV METHOD

The NPV method compares the present values of the cash flows of project alternatives
discounting them back at the opportunity cost (discount rate) of the firm. NPV is a
measure of how much value is created or added today by undertaking an investment of
long term nature. Given the goal of creating value for the stockholders, the capital
budgeting process can be viewed as a search for investments with positive net present
values. (Brealey et al; 2006)

The NPV rule for project appraisal is that any project with positive NPV is worth
investment. However in case under consideration, where most cost effective alternative is
required to be indentified, the project alternative with highest NPV will be considered
worth investment.

When a choice has to be made between alternative projects which are mutually exclusive,
it should be based on the size of the NPV – either the highest NPV surplus, or the least
NPV deficit, as appropriate. (Mott, 2005; page 222)

## NPV of each project option, as calculated in Question 2 is as follow.

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FIGURE 6

The most cost effective option is leasing the building, as it returns the highest NPV of
(\$3,930,859.00). This means that leasing the building will incur least cash out flow (with
respect to opportunity cost of the firm) during its life as compare to other two options.

Purchasing (option 1) will result in total discounted cash inflows (including relevant
benefits) of about \$5.5 millions, However, considering the initial investment of \$ 11.4
millions, project’s cash inflows are about \$5.9 millions less than the initial capital
investment. (Figure 1) Therefore it is not worth investing under NPV analysis.

Part-Financing (option 2) appears to be very close to Lease option, but in this scenario,
even after an investment of \$3.58 millions results in negative net cash flow of \$0.56
millions. (Figure 3) However, this option will be further evaluated in IRR analysis.

Leasing (option 3) shows highest cash flows from project, although a negative figure.
Therefore the firm should lease the building instead of owning or part financing it.
(Figure 4)

## IRR of the Differential

Purpose: to evaluate whether purchase or part-finance is worth investing as compare to
lease.
When analyzing two investments, one more expensive than the other, the internal rate of
return on the difference in their cash flows measures the extra potential return of the more
expensive investment. (Brealey et al; 2006) We know that internal rate of return is an
estimate for the potential yield on an investment, however, by calculating the
‘Incremental IRR (IRR of the differential) we evaluate whether the risk of increased
capital investment is worth the potential reward. It is generally agreed that for
mutually exclusive projects, if the IRR of the differential is higher than the
minimum acceptable rate of return, the more expensive investment is considered the
better one. (Khan & Jain, 2007). Therefore we will analyse, whether the IRR of the
differential of leasing the building is higher than purchasing or part financing or not? If it
is higher than, we conclude that LEASING the project is most cost efficient.

The IRR of the differential method subtracts the cash flow after tax of leasing from the
cash flow after tax of purchasing options, to arrive at a differential cash flow on which an
internal rate of return can be calculated. This IRR is then compared to the opportunity
cost of capital (discount rate) of the firm. In most cases, firms have a somewhat specific
knowledge of the opportunity cost on their projects, therefore a caparison of two
(opportunity cost and IRR of the differential) give insight into the project with significant
disparities in initial capital investment outlays. (Benninga & Czaczkes;)

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To the extent that the IRR of the differential cash flows (generated by owning the
building in option 1 and 2) is greater than the yield generated by the business, the firm
would select the “purchase” alternative. Conversely, if the yield is less than the yield that
firm can achieve on its business, the firm should select the “lease” option.

The following table shows IRR differential for all three options being considered. The
highest IRR is between cash flow of option 2 minus 3, (i.e. the part finance minus lease)
therefore option 3 should be selected as it will yield highest return.

FIGURE 8
IRR of the Differential

## Differential Cash Flows After Tax (\$)

Discounted years 1 minus 3 2 minus 3 1 minus 2
0 -11,400,000 -3,579,000 -7,821,000
1 730,949 156,383 574,566
2 740,300 154,975 585,325
3 740,300 149,820 590,480
4 740,300 144,237 596,063
5 740,300 138,191 602,109
6 806,300 197,643 608,657
7 806,300 190,551 615,749
8 806,300 182,871 623,429
9 12,676,374 5,902,412 6,773,962
IRR of the
Differential 7% 9% 6%

In discount rate sensitivity curves drawn in Figure 9, point (a) on the discount rate x-axis
represent the IRR of the differential of Part-Finance and Lease, point (b) represents the
Purchase and Lease, point (c) represents Part-Finance and Lease.

## Discount Rate Sensitivity

It is important to look at a range of discount rates because the size and timing of the cash
flows of the lease and purchase option vary at different rates. Particularly, the largest
inequality in size and timing usually occurs in year zero because of the size of the initial
investment, and in year 9 due to the positive cash flow generated through residual value;
however, year zero cash flows are not discounted at all. In lease versus purchase analysis,
the only positive cash flow comes in the form of residual value at year 9. As the discount
rates increase they minimize the positive effect of the residual value, and thus, flatten the
curve in the purchase option (as shown in the figure.9)

In our case under consideration, if the firms opportunity cost was less than 6% [point (a)
in Figure 9], then the purchase option 1 would have been most cost efficient for the firm.
However, as the firms opportunity cost (discount rate) is 10%, the leasing is the lowest
cost option with 9% IRR of the differential (option 3- option 2). In Figure 9 point (c)
represent the discount rate of 9% which is IRR differential between options 2 minus 3.

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This is the reason the firms with low overhead and high margins tend to lease real estate,
except when maintaining control and security are vitally important and often outweigh
the financial assessments. The firms opportunity cost is 10%, which is very close to the
highest IRR of the differential of leasing (i.e. 9%), the firm would likely be indifferent to
leasing or owning the building. To further strengthen our decision to choose most cost
effective option, we will also examine the inherent advantages and disadvantages of
owing a building for business use and leasing it.

FIGURE 9
Discount Rate Sensitivity
Option (1) IRR Firms opportunity Cost
£2,000,000

a b c Discount Rate
£0
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17%

-£2,000,000
,PV

-£4,000,000

-£6,000,000

Purchase
-£8,000,000
Purchase with Finance
Lease
-£10,000,000

## Why to rely on ,PV and IRR?

The Advantages is it will give the correct decision advice assuming a perfect capital
market, and correct ranking for mutually exclusive projects. It is easy to compare the
NPV of different projects and to reject projects that do not have an acceptable NPV.
On the other hand, NPV as method of investment appraisal requires the decision criteria
to be specified before the appraisal can be undertaken. It is very difficult to identify the
correct discount rate.

Both NPV and IRR are referred to as discounted cash flow methods because they factor
the time value of money into the capital investment project evaluation. Both NPV and
IRR are based on a series of future payments (negative cash flow), income (positive cash
flow), losses (negative cash flow), or "no-gainers" (zero cash flow).

NPV determines whether a project earns more or less than a desired rate of return and is
good at finding out whether or not a project is going to be profitable. IRR goes one step
further than NPV to determine a specific rate of return for a project. Both NPV and IRR

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give us numbers that we can use to compare competing projects and make the best choice

Conclusion:
NPV, IRR of the Differential and IRR Sensitivity analysis reveal that the most cost effective
option for the firm is LEASI,G THE BUILDI,G.

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PART 2: Critical Issues
Other issues that could influence the decision to evaluate cost effectiveness of the project
under review also need to be examined. These issues need careful consideration before
any project appraisal is accepted, due to their impact on financial health of the business.
As it is not possible to calculate some of the critical elements used in analysis of projects
cost efficiency a brief theoretical discussion is necessary. Investment appraisal is
concerned with decisions about whether, when and how to spend money on capital
projects. Such decisions are important ones for the companies involved because often
large sums of money are committed in an irreversible decision, with no certain
knowledge of the size of future benefits. (Mott, 2005)

Capital Rationing
WHY: We do not have enough information to evaluate the firm’s policy regarding availability of
capital resources.

A firm maximizes its wealth by accepting every project that has a positive net present
value. The act of placing restrictions on the amount of new investments or projects
undertaken by a company is called capital rationing. This is accomplished by imposing a
higher cost of capital for investment consideration or by setting a ceiling on the specific
sections of the budget. (Mott, 2005, Brealey 2006) There are two types of capital
rationing.

## Hard Capital Rationing

This arises when constraints are externally determined and the firm is unable to borrow
from the outside. For example if the firm is under financial distress, tight credit
conditions, firm has a new unproven product. Borrowing limits are imposed by banks
particularly in relation to smaller firms and individuals.

## Soft Capital Rationing:

This is due to internal, management-imposed limits on investment expenditure. Firms
might decide that expansion is a trouble not worth taking fearing to lose their control in
the company. The management allocates a fixed amount for each division as part of the
overall corporate strategy. Earlier debt issues might prohibit the increase in the firm’s
debt beyond a certain level.

One way to obtain the use of an asset is to lease it. Another way is to obtain outside
financing and buy it. The decision to lease or to buy the asset emphasises the importance
to a comparison of alternative financing arrangements for the use of an asset. In our

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assignment we are not sure if the option 2 is lease and which type of lease is meant in
option 3.

Operating Lease
This form of leasing has several important characteristics. Operating leases are often
relatively short-term; the life of the lease may be much shorter than the economic life of
the asset. Another very important characteristic of an operating lease is that it frequently
requires that the lessor maintain the asset. The lessor may also be responsible for any
taxes or insurance. Most interesting feature of an operating lease is that gives the lessee
the right to cancel the lease before the expiration date. (Brealey et al, 2001)

Financial Lease
With a financial lease, the lessee (not the lessor) is usually responsible for insurance,
maintenance, and taxes. It is also important to note that a financial lease generally cannot
be cancelled, at least not without a significant penalty. A financial lease is sometimes said
to be a fully amortized or full-payout lease, whereas an operating lease is said to be
partially amortized. Financial leases are often called capital leases by the accountants.
(Brealey et al, 2001)

Tax-Oriented Leases is in which the lessor is the owner of the leased asset for tax
purposes. Such leases are also called tax leases or true leases. In contrast, a conditional
sales agreement lease is not a true lease. Here, the “lessee” is the owner for tax purposes.
Conditional sales agreement leases are really just secured loans. The financial leases we
discuss in this material are all tax leases. Tax-oriented leases make the most sense when
the lessee is not in a position to use tax credits or depreciation deductions that come with
owning the asset. By arranging for someone else to hold title, a tax lease passes these
benefits on. The lessee can benefit because the lessor may return a portion of the tax
benefits to the lessee in the form of lower lease costs. (Brealey et al, 2001)

## Leveraged Leases is a tax-oriented lease in which the lessor borrows a substantial

portion of the purchase price of the leased asset on a nonrecourse basis, meaning that if
the lessee stops making the lease payments, the lessor does not have to keep making the
loan payments. Instead, the lender must proceed against the lessee to recover its
investment. In contrast, with a single-investor lease, if the lessor borrows to purchase the
asset, the lessor remains responsible for the loan payments regardless of whether or not
the lessee makes the lease payments.

## Real Estate specific issues

A brief summery of advantages and disadvantages of real estates with respect to leasing
and owning are described to further elaborate that in our project appraisal option leasing
is most cost efficient.

## Leasing/Renting a Real estate

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Tax Benefits: Unlike ownership, the occupancy costs of leasing are fully deductible, including
that portion of rent attributable to the value of the land.

Stability of Costs: The long-term occupancy costs of leasing, when viewed from the user’s
perspective, are generally simple to estimate and typically include base rent (pure net, pure gross,
or a hybrid), operating expense pass-through, amortized tenant improvements, percentage rent
(retail), and the like. Although some leases may expose a user to certain capital expenditures,
tenants are generally insulated from unforeseen capital costs such as the replacement of
mechanical systems, structural repairs, and roof or parking lot replacement.

Availability of Cash:
Leasing typically requires less cash out of pocket than ownership alternatives, leaving more
capital to invest in the user’s products and services or to establish addition allocations.

Loss of Salvage Value:
Most leases provide that any improvements made by the tenant become the property of
the landlord at the end of the lease term, or the landlord may require that the tenant
remove any improvements made to the premises at the tenant’s expense.

Cost: For a firm with a strong earnings record, ready access to capital, and the ability to take
advantage of tax benefits from ownership, leasing is often the more expensive alternative.

Loss of Appreciation: Leasing means the tenant does not benefit from property appreciation.

Contractual Penalties: If a leased property becomes obsolete or the business occupying the
space becomes unprofitable, the tenant must continue paying rent or face penalties for default.

Although most businesses acquire property through the use of equity and debt financing,
most owners are free to use the property as they wish.

Tax Advantages: An owner enjoys the benefit of interest and cost recovery deductions that
reduce the annual tax liability from real estate operations. The accumulated cost recovery
deductions, although taxed at the time of sale, are currently taxed at 25 percent, which is typically
less than the user’s marginal tax rate applied to ordinary income and the user enjoys the benefit of
those untaxed dollars until the property is sold. The capital gain from appreciation, while
currently taxed at 15 percent, is often 87 to 133 percent less than the user’s ordinary income tax
rate.

## Appreciation: An owner enjoys the benefit of capital appreciation over time.

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Debt Reduction and Equity Build-up: Assuming conventional financing, an owner enjoys debt
reduction and equity build-up through amortization of the original loan amount, since both
interest and principal are included in every mortgage payment.

Positive Leverage
While not guaranteed and subject to change in fluctuating financial markets or rising interest rate
environments, properties acquired with borrowed funds stand to benefit from positive leverage—
meaning the yield to the owner on a leveraged investment is greater than the yield on an
unleveraged investment.

Financial Liability: Although equity financing and investment capital may be readily available,
a commitment to long-term debt financing often involves a 20 to 30 year amortization and
possible loan provisions that mandate pre-payment penalties if a loan is paid off prematurely.

Time Frame: The decision to purchase should be made with a holding period in mind of at least
five years. Although historically commercial properties tend to appreciate in value, the costs of
acquisition and disposition may offset or eliminate the benefits of appreciation over a short-term
holding period.

Spatial Inflexibility: Often, owned facilities do not lend themselves to the expansion or
contraction of building improvements.

Initial Capital Outlay: Most commercial lenders require equity at closing of 20 to 30 percent of
the cost of the property acquired. This equity requirement ties up capital that could otherwise be
deployed to grow the user’s business.

Risks: There are numerous risks to ownership, including internal and external obsolescence,
market risks, financing risks, and unforeseen capital requirements for repairs and maintenance.

## Benefit of choosing Leasing (Option 3)

By leasing, it offers fixed-rate finance, “It is an alternative to borrowing at the risk-
free rate in order to buy the asset outright. (Pike, R. 2006)” There are many
advantages to leasing versus purchasing. With a primary consideration is cost. The cost
of a lease may be more or less than the cost to purchase and may differ among the lessees.
For example, if a firm has been running at a very low profit, it might not be able to enjoy
the tax benefits of investment, tax credit and accelerated depreciation, which are
associated with the purchase of some assets. A lessor could, however take full advantage
of the tax benefits and pass them along to the lessee by means of reduced lease payments.
Because the lease payments is tax deductible, the after-tax cost of leasing is the sum of
the lease payment and operating expenses less the tax shield provided by the deductible
expenses – A tax shield is the reduction in income taxes that results from taking an
allowable deduction from taxable income.

If the firm choose to purchase without financing of the property, fixed assets appear on
the balance sheet. If the firm choose to lease, they do not appear on the balance sheet.

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The leasing costs will show on the profit and loss account but no entry is made on the
balance sheet because the property is not owned by the firm. The advantages of this off-
balance-sheet finance is, it makes the company’s financial performance look better, the
return on capital employed (ROCE) ratio (Proctor, R. 2006) will increase as the asset
base will be smaller. By not financing a large sum to purchase property, the business
avoids increasing its gearing ratio.

Atrill (2006) suggest that by leasing, it only requires a relatively small yearly payment
instead of paying the entire cost of an asset. If some business is short of cash, large cash
outflows can be avoided by arranging for low lease payment in the early years of the
asset’s life. Once the asset generates positive cash flows the payments can be increased, it
tends to improve your ratios of assets to liabilities.

Rent is tax deductible. There is no down payment for the property. Sellers keep the taxes
deductions during the leasing period. If you purchase the asset, you have to capitalize and
depreciate the asset, which may mean a slower recovery of your costs. And also leasing
has no need to worry about selling the property if moving to a new location since this
option has more freedom. It has lower risk if the market is declining; leasing has no loss
of resource incurred.

## WACC and Leverage

WACC (Weighted Average Cost of Capital)
The (Weighted Average Cost of Capital) tells us that the firm’s overall cost of capital is a
weighted average of the costs of the various components of the firm’s capital structure.
WACC take the firm’s capital structure as it is. One important issue that we should have
explored in our assignment is that to find what happens to the cost of capital when we
vary the amount of debt financing, or the debt-equity ratio of the firm. (ACCA, 2006)

A primary reason for studying the WACC is that the value of the firm is maximized when
the WACC is minimized. The WACC is the discount rate appropriate for the firm’s
overall cash flows. Since values and discount rates move in opposite directions,
minimizing the WACC will maximize the value of the firm’s cash flows.

A calculation of WACC involves all capital sources that are, common stock, preferred
stock, bonds and any other long-term debt. The WACC of a firm increases as the beta and
rate of return on equity increases, as an increase in WACC notes a decrease in valuation
and a higher risk.

Usually business enterprises discount the cash flows at WACC to determine the Net
Present Value (NPV) of a project, using this formula:

## NPV = Present Value (PV) of the Cash Flows discounted at WACC.

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The WACC equation is the cost of each capital component multiplied by its proportional
weight and then summing:

Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate

Calculation of a weighted average cost of capital takes account of the different after-tax
costs of debt and equity and of their significance in the make up of the total capital. The
weightings used in the calculations should be based on the market value of the securities
and not on their book or balance sheet values. (Mott, 2005)

Leverage
Leverage is most commonly used in real estate transactions; it is the amount of debt used
to finance a firm's assets. A firm with significantly more debt than equity is considered to
be highly leveraged. The leverage is also considered as the use of various financial
instruments or borrowed capital, such as margin, to increase the potential return of an
investment. (McLaney, 2003)

Leverage helps both the investor and the firm to invest or operate. However, it comes
with greater risk. If an investor uses leverage to make an investment and the investment
moves against the investor, the loss is magnified as compared to the situation where
investment had not been leveraged. That’s why leverage magnifies both gains and losses.
In the business world, a company can use leverage to try to generate shareholder wealth,
but if it fails to do so, the interest expense and credit risk of default destroys shareholder
value. (ACCA, 2006)

## The Effect of Financial Leverage

Impact of financial leverage on the payoffs to stockholders is important to be considered
because financial leverage refers to the extent to which a firm relies on debt. The more
debt financing a firm uses in its capital structure, the more financial leverage it employs.
Financial leverage can dramatically alter the payoffs to shareholders in the firm. However,
financial leverage may not affect the overall cost of capital. If this is true, then a firm’s
capital structure is irrelevant because changes in capital structure won’t affect the value
of the firm.

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Inflation
Existence of inflation and its effects on the future cash flows of projects being appraised
can not be ignored. Inflation brings additional problems to project appraisals. It increases
the uncertainty and makes more difficult the estimation of the future cash flows of sales
revenue, operating costs and working capital requirements. It also influences the required
rate of return through its effects on the nominal cost of capital. Following formula adjust
nominal values of rate of return for inflation.

In the context of investment appraisals it means that two aspects of the value of money
must be considered. The time value of money has already been catered for by the use of
present value factors which deduct interest for the time elapsed when waiting for future
cash receipts. The other aspect is the change in the value of money itself, not because of
the time lapse, but because the inflationary process decreases its purchasing power. (Mott,
2005)

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• Smart, S.B., Megginson, W.L. and Gitman, L.J. (2004), Corporate Finance, 1st ed,
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• Teall, J. L. & Hasan, I. (2002), Quantitative Methods for Finance and Investments,
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• Timothy, G. & Singer, D. (2005) The Real Estate Investment Handbook, p.80-83

## • McQuai, D. J. and Bille, P. A. (2005), College Accounting, 8th ed, Boston:

Houghton-Mifflin.

• Microsoft Learning, 2003. “Go with the cash flow: Calculate NPV and IRR in
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• http://www.reidepot.com/articles/Matthew-Chan/Lease-Options.html [Accessed by
12 Aug,2009]

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• Rental property n.d, http://www.altiusdirectory.com/Realestate/rental-property.html
[assessed by 17 Aug,2009]

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