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Answer four 5 marks) pr Section 2- Problem 1 (5 marks): Due to a recent boom in the demand for sheds, Mike's Sheds Inc.
Answer four 5 marks) pr Section 2- Problem 1 (5 marks): Due to a recent boom in the demand for sheds, Mike's Sheds Inc. has decided to expand to Gander. He has narrowed down his search to three buildings in the area, and wants to select the one most financially advantageous. His alternatives are: Roe Avenue-purchase price of $600,000 cash, and a useful life of 25 years Magee Road-lease for 25 years for $59,000 per year, with payments due at the beginning of each year (i.e. the first payment is due upon signing) McCurdy Drive-purchase for $659,000 cash, and a useful life of 25 years. The building is larger than Mike needs, so he can sublet part of the building for $7,800 per year, payable at the end of each year. Mike doesn't anticipate any vacancies in the rent income.. Assuming Mike's interest rate for funds is 10%, which building should he acquire? Be sure to show all your present value calculations to support your recommendation.
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