1.

Wildhorse Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested the construction of a new plant to meet the increasing demand for the companys bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $3,205,500 of 10% term corporate bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1, with the first interest payment on September 1st, 2020. At the time of issuance, the market interest rate for similar financial instruments is 8%. As the controller of the company, determine the selling price of the bonds. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

2.

The Sheridan Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Sheridan has decided to locate a new factory in the Panama City area. Sheridan will either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to the following three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $610,000, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $71,570 being made at the beginning of the year. Building C: Purchase for $650,800 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,890. Rental payments will be received at the end of each year. The Sheridan Inc. has no aversion to being a landlord.

In which building would you recommend that The Sheridan Inc. locate, assuming a 11% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)