Your firm is preparing to open a new retail strip mall and you have multiple bus
ID: 2800897 • Letter: Y
Question
Your firm is preparing to open a new retail strip mall and you have multiple businesses that would like lease space in it. Each business will pay a fixed amount of rent each month plus a percentage of the gross sales generated each month. The cash flows from each of the businesses have approximately the same amount of risk. The business names, square footage requirements, and monthly expected cash flows for each of the businesses that would like to lease space in your strip mall are provided below:
Business Name
Square Feet Required
Expected Monthly Cash Flow
Videos Now
4,000
70,000
Gords Gym
3,500
52,500
Pizza Warehouse
2,500
52,500
Super Clips
1,500
25,500
30 1/2 Flavors
1,500
28,500
S-Mart
12,000
180,000
WalVerde Drugs
6,000
147,000
Multigular Wireless
1,000
22,250
Required: If your new strip mall will have 16,000 square feet of retail space available to be leased, to which businesses should you lease and why?
Business Name
Square Feet Required
Expected Monthly Cash Flow
Videos Now
4,000
70,000
Gords Gym
3,500
52,500
Pizza Warehouse
2,500
52,500
Super Clips
1,500
25,500
30 1/2 Flavors
1,500
28,500
S-Mart
12,000
180,000
WalVerde Drugs
6,000
147,000
Multigular Wireless
1,000
22,250
Explanation / Answer
Cash flow per square feet
70000/4000=17.5
52500/3500=15
52500/2500=21
25500/1500=17
28500/1500=19
180000/12000=15
147000/6000=24.5
22250/1000=22.25
We will lease first with the hihgest cash flow per square feet
Hence, we will lease to walverde for 6000 square feet, multigular for 1000 square feet, pizza for 2500 sqaure feet,301/2 for 1500 square feet, videos for 4000 square feet..Unused space is 1000 square feet
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