Put It into Practice -- Compute the Present Value of an Ordinary Annuity and Annuity Due FACTS The Healthy Hearth Co., a maker of gluten-free breads and bagels, hopes to increase its market share in the upper Midwest. To do so, Healthy Hearth has decided to locate a new factory in Fargo, North Dakota. The company 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 alternatives that will meet their needs. 1. Building A: Purchase for $1,300,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $14,000. Rental payments will be received at the end of each year. Healthy Hearth is happy to be a landlord. 2. Building B: Lease for 25 years with annual lease payments of $140,000 being made at the beginning of the year. 3. Building C: Purchase for a cash price of $1,200,000, useful life 25 years. INSTRUCTIONS Explain which alternative would you recommend for Healthy Hearth, assuming a 12% cost of funds