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Skysong Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in Western Canada. To do so, Skysong
Skysong Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in Western Canada. To do so, Skysong has decided to locate a new factory in Kelowna, B.C. Skysong will either buy or lease a site, depending on 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 $610,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $70,000 being made at the beginning of the year. Building C: Purchase for $665,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,300. Rental payments will be received at the end of each year. Skysong has no aversion to being a landlord. Click here to view Table A4-PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 Click here to view Table A.5-PRESENT VALUE OF AN ANNUITY DUE OF 1 Calculate the net present value of three buildings, assuming a 11% cost of funds. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to O decimal places, e.g. 5,275) Building A $ Building B. Building C 1A $ Net present value In which building would you recommend that Skysong locate? Skysong should locate itself in
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