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Brady purchased the building in which their corporate office is housed on 1/1/17 for $3,500,000. They put down $900,000 cash and had to borrow the
Brady purchased the building in which their corporate office is housed on 1/1/17 for $3,500,000. They put down $900,000 cash and had to borrow the remaining amount at 4% over a 20-year term. At the time of the purchase, they had the option to lease the building. The 20-year lease would begin on 1/1/17, and called for monthly payments of $35,000 beginning at the end of the month, for the first 10 years and payments of $30,000 beginning on 1/31/27 for the remaining 10 years of the lease. Brady had the option to purchase the building for $1 on December 31, 2036 at the end of the lease. Did the CFO make the right decision by purchasing the building? Why or why not? Show your work. a)
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