The Ayayai Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Ayayai has decided to locate a new factory in the Panama City area. Ayayai 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 buildings that will meet their needs.

Building A:Purchase for a cash price of $618,900, useful life27years.

Building B:Lease for27years with annual lease payments of $71,820being made at the beginning of the year.

Building C:Purchase for $652,700cash. This building is larger than needed; however, the excess space can be sublet for27years at a net annual rental of $6,430. Rental payments will be received at the end of each year. The Ayayai Inc. has no aversion to being a landlord.

Calculate the net present value of Building A, Building B, and Building C options, assuming a 12% cost of funds. In which building would you recommend that The Ayayai Inc. locate? SHOW CALCULATIONS