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Splish Brothers Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in Western Canada. In order to
Splish Brothers Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in Western Canada. In order to do so, Splish Brothers has decided to locate a new factory in Kelowna, B.C. Splish Brothers 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 $605,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $75,000 being made at the beginning of the year. Building C: Purchase for $655,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,900. Rental payments will be received at the end of each year. Splish Brothers Inc. has no aversion to being a landlord. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE Calculate the present value of Building A and Building B and the present value of Building C (including the rental payments noted). assuming a 12% cost of funds. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to O decimal places, eg. 5,275)
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