Analysis of Alternatives Ch.5 -Time Value of Money Inguinal Services, Corp. is looking for a new building to expand its production. After an exhaustive search, the following sites were leading contenders: 1. Building A: Purchase for $600,000 cash. 2. Building B: Lease for 25 years with annual lease payments of $69,000 made at the beginning of each year. 3. Building C: Purchase for $645,000 cash. Building has space that can be sublet for 25 years at a net annual rental of $7,000, received at the end of each of the 25 years. 4. Building D: Purchase with a note requiring 25 payments (made at the end of each of the 25 years) of $70,000 and a balloon payment of $600,000 at the end of the 25th year. 5. Building E: Purchase with $200,000 down and a note requiring payments of $45,000 made at the beginning of each of the next 25 years. Assume Inguinal will be buying one of these buildings on 1/1/19. Additionally assume each building has a useful life of 25 years and that the prevailing interest rate is 12%. Which building has the lowest cost? Write out the journal entry recording the purchase of that building. What would the cost of financing that building be? Chapter 7 Dividends and Share Repurchases: Analysis 299 2. Which of the following assumptions is not required for Miller and Modigliani's (MM) dividend theory? A. There are no taxes. B. Investors sort themselves into dividend clienteles. C. Shareholders have no transaction costs when buying and selling shares