In 2016, Google rented 1000 acres of a historic California airbase in the San Francisco Bay Area for $1.16 billion via a 60-year lease. Annual M&O is expected to be $6.3 million. In addition, Google will refurbish three hangars at a cost of $2.6 million 4 years from now. Assuming the $1.16 billion represents the present worth of only the lease, what is the equivalent AW of the transaction over the 60-year period at an interest rate of 15% per year?
What will be an ideal response?
In $ billion units
AW = -1.16(A/P,15%,60) – 0.0026(P/F,15%,4)(A/P,15%,60) - 0.0063
= -1.16(0.15003) – 0.0026(0.5718)(0.15003) - 0.0063
= $ - 0.180,557 ($-180,557,847 per year)
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