Hardwick Enterprises is evaluating alternative uses for a three - story manufacturing and warehousing building that it has purchased for SI , 250 010 . The company can continue to rent the building to the present occupants for 860 000 per year . The present occupants have indicated an interest in staying in the building for at least another 5 years . Alternatively , the company could modify the existing structure to use for its own manufacturing and warehousing needs . The company's production engineer feels the building could be adapted to handle one of two new product lines . The cost and revenue data for the two product alternatives are as follows Product A Product B Initial cash outlay for building 115 090.00 8160 000.00 Initial cash outlay for equipment 8 220 090.00 8 245. 090.00 Annual pretax cash revenues ( generated $ 235,000.00 8 265 000.00 Annual pretax expenditures ( generated 85 090 $ 105 090.00 The building will be used for only 15 years for either Product A or Product B . After IS years , the building will be too small for efficient production of either product line . At that time , the company plans to rent the building to firms similar to the current occupants To rent the building again , the company will need to restore the building to it's present layout . The estimated cash cost of restoring the building if Product A has been undertaken is $75 090 If Product B has been manufactured the cash cost will be $85 090 . These cash costs can be deducted for tax purposes in the year the expenditures occur . The company will depreciate the original building shell purchased for $1 250 090 ) over a 30 - year life to zero , regardless of which alternative it chooses The building modifications and equipment purchases for either product are estimated to have a 15 - year life . They will be depreciated by the straight - line method . The firm's tax rate is 34 percent , and its required rate of return on such investments is 12 percent . For simplicity , assume all cash flows occur at the end of the year . The initial outlays for modifications and equipm ent will occur today ( Y car ! ) and the restoration outlays will occur at the end of Y car IS The company has other profitable ongoing operations that are sufficient to cover any losses . Which use of the building would you recommend to management