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Acontractorisinneedof10,000squarefeetofstoragespacetostoreitsspoilable materials to be used in a project that will be completed in 3 years. The contractor is considering the purchase of an acre of

  1. Acontractorisinneedof10,000squarefeetofstoragespacetostoreitsspoilable materials to be used in a project that will be completed in 3 years. The contractor is considering the purchase of an acre of land for $8,000 and erecting a temporary metal structure at a cost of $7 per square foot. At the end of the three-year period, the contractor expects to be able to sell the land for $9,000 and the building for $12,000. Alternatively, the contractor can lease storage space for $0.15 per squarefoot per month payable at the beginning of each year. If the contractor's minimum attractive rate of return is 10%, which type of storage space should be used? Use the present worth method of analysis.

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