Corrine Company owns a warehouse that it no longer needs in its own operations. The warehouse was built, at a cost of $270,000, 10 years ago, at which time its estimated useful life was 15 years. There are two proposals for the use of the warehouse:
1. Rent it at $72,000 per year, which includes estimated costs of $27,000 per year for maintenance, heat, and utilities to be paid by the lessor.
2. Sell it outright to a prospective buyer who has offered $225,000. Any capital gain would be taxed at the 30 percent rate.
Required:
a. Calculate the after-tax income if (1) Corrine Company keeps the warehouse and (2) if Corrine Company sells the warehouse.
b. Which proposal should the company accept? Why?