OPTION TO RENEW IN LEASING OF COMPANIES.

Discounted cash flow techniques are insufficient to assess the diversity of options that can be associated with the leases. For this reason, the explicit evaluation of these options is critical to complete an analysis of the lease. The main objective of this paper is to determine the value of the option to renew the lease by the lessee and its effect on the rent under the assumption that the acceptable maximum annual rent for the lessee is the net cash flow generated by the company. [ABSTRACT FROM AUTHOR]