Question $5(1$ point$)$

Gavin Mills has an existing facility that it paid $28,000,000$ for $10$ years ago. It has $3$

choices for this facility now: sell it outright for $9\mathrm{.}5M$ today, lease it for the next $4$

years to a supplier, then sell it at the end of the last year of the lease for $5M,$ or use it

to produce flax seed for $4$ years, then sell it at the end of the last year of production

for $6$M$,$ but it will have to be upgraded $($today$)$ for use at a cost of $1\mathrm{.}5$M $($not paid

under the lease option$).$ If it is used by Gavin to produce flax seed it can be sold for

$$42$ a bushel with a contribution margin ratio $($how much the firm keeps after

variable costs of production$)$ of $25\%.$ To operate the plant, Gavin will incur $$200,000$

per year of fixed costs, regardless of production levels $($not applicable to the lease$).$

Gavin forecasts that it will sell the following bushels in each of the next $4$ years:

$200,000,300,000,400,000,100,000.$ The lease terms would be $$2M$ per year plus a

$$200,000$ per year reduction in costs for the supplies Gavin buys from the leasee.

Please use a WACC of $12\%.$

What would the CMR have to decrease to in order for the outright sale more

attractive than the use for production decision? Please consider whole number

changes in percent $($i$.$e$.30\%$ to $31\%)$ and enter your response in whole numbers with

no units $($i$.$e$.\%)$ and NO decimal places: $"21\mathrm{.}6\%"$ would be $"21".$