McCormick & Company is considering building a new factory in Largo, Maryland. James Francis, a landowner, is selling a 4.35-acre parcel of industrial zoned land with a listed sale price of $3,000,000.00 for the land. McCormick & Company is interested in the land and so is another manufacturing company. The competing manufacturing company has made an offer of $2,300,000.00 in cash and $300,000 each year for 15 years for the land. McCormick & Company knows it can make an offer to outbid the competitor to obtain the land. So, McCormick & Company decided to offer $4,424,000.00 in cash.

Now, the land owner, James Francis, must make a decision between the two competing offers. To make this decision, James should first identify the Present Value (PV) of each offer. James's bank is offering a 12 percent (12%) interest rate if the competing manufacturing company borrows money to pay its annual payment. Let's help James make his decision by answering the following questions using the template to the right.

1. What is the Present Value (PV) of each offer? To find out, complete the chart to the right.

2. Based on your Present Value calculations, which offer should James accept?

McCormick & Company has decided in order for the company to have a minimal impact on current cash flows, the company will need to borrow seventy percent (70%) Loan to Value (LTV) of the $4,424,000.00 offer in the form of a commercial acquisition and development loan to purchase the land. This means McCormick & Company will need to make a thirty percent (30%) down payment to secure the commercial acquisition and development loan. McCormick & Company is considering three different loan options:

Loan A: 20-year loan with a fixed annual interest rate of 6 percent

Loan B: 10-year loan with a fixed annual interest rate of 4.5 percent

Loan C: 15-year loan with a fixed annual interest rate of 5 percent

3. How much of the total $4,424,000.00 offer will be financed?

4. Which loan will have the lowest monthly payment?

5. Which loan will have the lowest total payback amount?

6. Would you recommend McCormick & Company select the loan with lowest monthly payment or lowest total payment and why?

1. Marie, an employee at McCormick, has determined that she will need $5000 per month in retirement over a 30-year period. She has forecasted that her money will earn 7.2% compounded monthly. Marie will spend 25-years working toward this goal investing monthly at an annual rate of 7.2%. How much should Marie's monthly payments be during her working years in order to satisfy her retirement needs?Hint: Find how much Marie must have at retirement, then find the monthly payments to reach that goal.

What maximum amount could Marie withdraw each month so that her balance never decreases (nearest dollar)?

2. Kathy plans to move to Maryland and take a job at McCormick as the Assistant Director of HR.She and her husband Stan plan to buy a house in Garrison, MD and their budget is $500,000.They have $100,000 for the down payment and McCormick will pay for closing costs.They are considering either a 30 year mortgage at 4.5% annual rate or a 15 year mortgage at 4%.Calculate the monthly payment for each.Property taxes and insurance will add $1,000 permonth to whichever mortgage they choose.What should Kathy and Stan do?

After you finished with the above question.Executive summary to McCormick and Company with recommendation.