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Larkspur Inc., manufactures ice tea and would like to increase its market share in the North. In order to do so, Larkspur has decided to
Larkspur Inc., manufactures ice tea and would like to increase its market share in the North. In order to do so, Larkspur has decided to locate a new factory in the Cedar Rapid area. Larkspur 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 buildings. Building A: Purchase for a cash price of $1,547,000, useful life 28 years. Building B: Lease for 28 years with annual lease payments of $123,000 being made at the beginning of the year. Building C: Purchase for $1,962,000 cash. This building is larger than needed; however, the excess space can be sublet for 28 years at a net annual rental of $19,400. Rental payments will be received at the end of each year. Larkspur Inc. has no aversion to being a landlord. Click here to view factor tables In which building would you recommend that Larkspur Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places, e.g. 4,585.81.) Net Present Value Building A $ Building B $ Building $
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