BTV Co., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Midwest. In order to do so, BTV has decided to locate a new factory in the Iowa City area. BTV 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 $14,000,000, useful life 25 years.

Building B: Lease for 25 years with annual lease payments of $1,100,000 being made at the beginning of each year.

Building C: Purchase for $16,500,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $200,000. Rental payments will be received at the end of each year. BTV Co. has no aversion to being a landlord.

In which building would you recommend that BTV Co. locate, assuming a 7% cost of funds?