GO FOSTER

To calculate the value a lease payment adds to a building, you need to use the capitalization rate (cap rate) formula, which relates a property's value to its net operating income (NOI). [1]  

Calculations 1. Determine the annual lease payment: The question provides a total lease payment of $250,000 over 10 years. 

 • Annual Lease Payment = $250,000 / 10 years = $25,000. 

2. Estimate the Net Operating Income (NOI): For the purpose of using the cap rate formula, the annual lease payment is assumed to be the Net Operating Income (NOI). The NOI represents the annual income generated by the property before deducting interest expenses or income taxes. 

3. Apply the cap rate formula: The formula to find the property value is a rearranged version of the standard cap rate formula. 

 • Formula:  

 • Property Value = $25,000 / 0.06 (6%) 

 • Property Value = $416,666.67 [1, 2, 3, 4, 5]  

Conclusion A $250,000 lease payment over 10 years, with a 6% cap rate, adds an estimated $416,666.67 in value to the building. This figure reflects the building's total worth, not just the lease's value. [6, 7]  

AI responses may include mistakes.

[1] https://www.talimarfinancial.com/how-to-value-a-property-using-a-cap-rate-a-guide-for-real-estate-investors/

[2] https://www.commercialrealestate.loans/capitalization-rate-calculator/

[3] https://askfilo.com/user-question-answers-smart-solutions/problem-set-no-1-future-value-and-present-worth-1-a-3336383832343537

[4] https://study.com/academy/lesson/the-income-approach-to-property-valuation.html

[5] https://www.chegg.com/homework-help/questions-and-answers/corporation-signs-ten-year-lease-building-present-value-lease-payments-250-000-lease-capit-q50274375

[6] https://www.linkedin.com/pulse/evaluating-sale-leaseback-strategies-above-market-rent-altshuler-zxwwf

[7] https://primior.com/how-to-analyze-real-estate-pro-forma-step-by-step-guide-free-template/

Henry McClure  
785.383.9994
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time kills deals

Go Foster

For a $3 million, 10-year lease, the most significant financial implication under modern accounting standards (ASC 842) is the requirement for the lessee to record a Right-of-Use (ROU) asset and a corresponding lease liability on the balance sheet. The precise accounting treatment depends on the lease's classification, which affects how expenses are reported on the income statement. [1, 2, 3, 4, 5]  

Key calculations and concepts1. Annual payments If the $3 million is the total value over the lease term and payments are made annually and evenly, the nominal annual payment is:$3 million / 10 years = $300,000 per year. [6]  

In reality, commercial leases often have escalating payments, and the total payments over the term may exceed the base amount due to variable costs. [6, 7, 8, 9]  

2. Lease liability and ROU asset At the beginning of the lease, the company must recognize a lease liability and an ROU asset on its balance sheet. 

• Lease Liability: The present value of all future lease payments. This calculation requires a discount rate, typically the rate implicit in the lease or the lessee's incremental borrowing rate (IBR). 

• Right-of-Use (ROU) Asset: The lease liability plus any initial direct costs, minus any lease incentives. [10, 11, 12, 13, 14]  

Example calculation (with assumptions): 

• Assumptions: Annual payments of $300,000 made at the beginning of each year. A discount rate of 5%. 

• Calculation: 

 • The lease liability is the present value of the nine remaining payments of $300,000. The first payment is not included in the liability, as it's paid upfront. 

 • Using a present value of an annuity calculation for the remaining payments:  

 • Where P = $300,000, r = 0.05, and n = 9. 

 • 

• Initial Entry: 

 • The initial lease liability is approximately $2,130,865. 

 • The ROU asset is the liability plus the first payment: $2,130,865 + $300,000 = $2,430,865. [15, 16, 17, 18, 19]  

3. Expense recognition The way expenses are recorded on the income statement depends on whether the lease is classified as a finance or operating lease. [2, 20, 21]  

| | Operating Lease | Finance Lease |

| --- | --- | --- |

| Income Statement | A single, straight-line "lease expense" is recorded each year. For a $3 million lease over 10 years, this would be an expense of $300,000 annually (before considering escalations or other factors). | Two separate expenses are recorded: interest expense on the lease liability and amortization expense for the ROU asset. • The interest expense is higher in earlier years and decreases over time. • The amortization expense is typically straight-line. |

| Cash Flow Statement | Payments are shown as an operating activity. | The interest portion of payments is an operating activity, while the principal portion is a financing activity. |

| Balance Sheet | The ROU asset and lease liability decrease over the term. | The ROU asset and lease liability decrease over the term. |

4. Financial ratio implications Recording the lease liability on the balance sheet increases a company's total reported liabilities. This can significantly affect financial metrics, including: 

• Debt-to-equity ratio: A higher lease liability increases debt, making the ratio appear higher. 

• EBITDA: Operating lease expenses are typically classified as operating costs, while the interest on a finance lease is below EBITDA. The expense recognition method can therefore affect the EBITDA metric. 

• Covenants: Companies with loan agreements may have to renegotiate their financial covenants (restrictions on their financial performance) due to the new accounting rules. [20, 21, 25, 26, 27]  

AI responses may include mistakes.

[1] https://www.fasb.org/projects/current-projects/leases

[2] https://www.accruent.com/resources/knowledge-hub/new-lease-accounting-standards

[3] https://visuallease.com/asc-842-10-changes-you-need-to-know-about-your-balance-sheet/

[4] https://www.superfastcpa.com/bar-cpa-exam-how-to-identify-the-criteria-for-classifying-a-lease-arrangement-for-a-lessor/

[5] https://cathcap.com/understanding-asc-842/

[6] https://finquery.com/blog/rent-expense-explained-example-straight-line-rent/

[7] https://ipacommercial.com/2025/05/13/commercial-real-estate-lease-rates/

[8] https://www.energysage.com/solar/solar-leases-vs-ppas/

[9] https://www.doorloop.com/definitions/gross-lease

[10] https://tax.thomsonreuters.com/blog/how-to-record-the-lease-liability-and-corresponding-asset/

[11] https://ileasepro.com/blog/what-is-lease-liability/

[12] https://www.cradleaccounting.com/insights/how-to-calculate-the-present-value-of-future-lease

[13] https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/leases/leases__4_US/chapter_4_accounting_US/42_initial_recogniti_US.html

[14] https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/leases/leases__4_US/chapter_4_accounting_US/42_initial_recogniti_US.html

[15] https://www.debtbook.com/blog/asc-842-journal-entries-with-examples

[16] https://www.gggllp.com/how-new-lease-accounting-rules-may-impact-landlords-and-tenants/

[17] https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/leases/leases__4_US/chapter_4_accounting_US/42_initial_recogniti_US.html

[18] https://www.crunchafi.com/blog/asc-842

[19] https://cars.usnews.com/cars-trucks/best-car-deals/car-lease-deals

[20] https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valquestions/oplease.htm

[21] https://www.withum.com/resources/asc-842-lease-accounting-for-tenants-and-landlords/

[22] https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/leases/leases__4_US/chapter_4_accounting_US/44_subsequent_recogn_US.html

[23] https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_statement___18_US/chapter_14_presen_US/142_lessees_US.html

[24] https://dart.deloitte.com/USDART/home/codification/broad-transactions/asc842-10/roadmap-leasing/chapter-6-lease-payments/6-10-subsequent-measurement-lease-payments

[25] https://www.vintti.com/blog/capital-lease-accounting-formula-accounting-explained

[26] https://ileasepro.com/blog/top-10-accounting-reports/

[27] https://www.netgain.tech/blog/overview-of-asc-842

Henry McClure  
785.383.9994
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time kills deals

21

The "21 days to get what you want" theory is a popular concept that suggests a person can form a new habit in 21 days, but this is a simplification and not a universally accepted fact. The idea originated from plastic surgeon Dr. Maxwell Maltz, who observed his patients took about 21 days to adjust to new features. However, it's more of a psychological benchmark or minimum, and the actual time for habit formation varies significantly based on the individual, the complexity of the habit, and the commitment involved. [1, 2, 3]  

The origins and reality of the theory 

• Origin: The concept is based on Dr. Maxwell Maltz's observations in the 1950s that it took a minimum of 21 days for his clients to get used to their new faces after surgery. He later published this observation, which was then popularized. [1]  

• The "minimum" point: The key in Maltz's original statement was the word "minimum." He noted that it takes a minimum of about 21 days for an old mental image to dissolve and a new one to form. [1]  

• Varying timeframes: Modern research suggests that the time to form a habit can range from 18 days to 254 days, depending on the person and the habit. Factors like the complexity of the habit and individual differences play a large role. [3]  

• Psychological benchmark: While not a hard and fast rule, the 21-day idea is still useful as a motivational tool. It can help you start with a concrete, achievable goal, even if the habit isn't fully formed by then. [4, 5]  

How to use the 21-day concept to build a habit 

• Start small: Don't try to change everything at once. Make small, incremental changes to make the process more manageable and sustainable. [6]  

• Plan ahead: Don't go into it blindly. Map out your new routine and schedule reminders for yourself. Have a plan for when obstacles inevitably appear. [6]  

• Find accountability: Share your goal with a supportive friend, family member, or group. An accountability partner can help you stay on track. [6, 7]  

• Track your progress: Keep a daily checklist or graph to visually track your progress. Seeing how far you've come can be a great motivator. [7]  

• Reward yourself: Plan small rewards for yourself along the way to stay motivated. This could be anything from a massage to a new shirt. [7]  

• Don't give up if you slip up: If you miss a day, don't consider it a failure. View it as a learning opportunity, analyze what went wrong, and get back on track. Consistency over time is key, regardless of how long it takes. [6, 8]  

AI responses may include mistakes.

[1] https://www.linkedin.com/pulse/why-lifelong-habit-change-21-days-total-bs-eva-george

[2] https://www.freeletics.com/en/blog/posts/is-21-days-all-it-takes/

[3] https://theleadershipsphere.com.au/insights/the-21-day-habit-challenge-fact-or-fiction/

[4] https://www.reddit.com/r/getdisciplined/comments/cs319i/advice_always_remember_the_2190_rule_it_takes_21/

[5] https://twentyonetoys.com/blogs/teaching-21st-century-skills/21-days-to-form-habits

[6] https://vocal.media/motivation/how-21-days-can-change-your-life

[7] https://www.anchortherapy.org/blog/change-a-habit-in-just-21-days

[8] https://www.scientificamerican.com/article/how-long-does-it-really-take-to-form-a-habit/

Henry McClure  
785.383.9994
sent from mobile 📱
time kills deals

Idea

An old-timey Scottish pub features rustic, layered materials like dark wood and stone, with low, intimate ceilings and cozy, worn furniture. Key elements include a prominent, central bar often made of dark wood, multiple small rooms or "snugs," and a large fireplace, creating a warm, lived-in atmosphere that feels like a historical community hub. [1, 2, 3]  

Architectural and material features 

• Walls and flooring: Expect rough-hewn stone or plaster walls, and worn wooden floorboards, possibly with a slate or flagstone floor in high-traffic areas. [1, 3]  

• Ceilings: Low, dark wooden beams or plaster ceilings to create an intimate feel. Some historic buildings might have timber-framed construction. [1, 3, 4]  

• Windows: Small, sometimes multi-paned windows, which historically helped keep heat in. Large bay windows may exist in some areas for seating, but often the overall impression is one of enclosure. [1, 3, 4, 5]  

• Lighting: Soft, layered lighting is crucial. Think of small, warm lights, perhaps wall sconces, and wall-mounted brass lamps rather than bright, overhead fixtures. [1, 3, 6]  

Interior design and layout 

• Bar area: A central, substantial bar is the focal point. It should be made of dark, aged wood, possibly with a polished brass or copper top and footrest. Behind the bar, a wall of shelves displaying bottles, often with a mix of vintage and modern bottles, creates a visual history. 

• Seating: A mix of worn leather, dark wood, and padded seating. Look for built-in banquettes, small wooden tables, and potentially some padded, high-backed chairs in corners or near the fire. Intimate, separated spaces called "snugs" are a hallmark of traditional pubs, offering private nooks for small groups. 

• Fireplace: A large, working fireplace is a central feature, providing both heat and a focal point for the room. The surrounding area might be a brick or stone hearth, with a substantial mantelpiece. 

• Decor: The look is layered and authentic, not manufactured. This includes historical elements like old maps or framed prints of local scenery, family photos, and antique mirrors that help reflect the warm light. Shelves should be filled with decorative objects like old bottles, tankards, and ornaments, giving the impression of a lived-in space with a story. [1, 3, 6, 7]  

Overall atmosphere 

• Lived-in feel: The space should feel welcoming and comfortable, with surfaces that show their age and history, rather than looking brand new. [1, 6]  

• Sense of history: The design should evoke a sense of continuity with the past, with elements like the sturdy bar, the fireplace, and the low ceilings communicating a long history of use and community connection. [1, 2, 3]  

AI responses may include mistakes.

[1] https://theedinburghreporter.co.uk/2025/08/how-to-style-a-scottish-pub-a-fresh-take-for-modern-owners/

[2] https://www.quora.com/How-would-you-describe-British-pubs-to-the-rest-of-the-world

[3] https://irishpubcompany.com/how-historic-pub-architecture-influences-modern-restaurant-design/

[4] https://echo-binder.com/article-1.html

[5] https://edinburgh.org/blog/edinburghs-oldest-bars-and-pubs/

[6] https://www.quora.com/What-does-an-old-English-pub-look-like-on-the-inside-How-is-it-different-from-American-bars

[7] https://irishpubcompany.com/history-of-snugs-in-london/

Henry McClure  
785.383.9994
sent from mobile 📱
time kills deals