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The Reinhart Center, a not-for-profit dedicated to combating homelessness, is looking for new office space. There are two options available to them. Building A is
The Reinhart Center, a not-for-profit dedicated to combating homelessness, is looking for new office space. There are two options available to them. Building A is offering a ten-year lease for an up-front cost of $40,000 plus annual payments of $25,000. The annual payments are due in advance, with the first payment due immediately. Building B is available for purchase at a price of $170,000. The Center estimates that the building will last for 15 years and will require $10,000 in annual maintenance costs. The Center uses a discount rate of 4.0%. Use the above information to calculate the following: [Note: Round your answers to TWO decimal places. Do not include symbols ($) or commas in your answers. Write only POSITIVE numbers - e.g. even if Excel gives you -253.42, write 253.42] A) Present Value of Building A's cost is: [Blank 1] B) Present Value of Building B's cost is: [Blank 2] C) Which building should the Center choose? [Write 1 if Building A or 2 if Building B] = [Blank 3] D) If the Center instead uses a discount rate of 3.9%, ignoring the buy option, does the option to lease become more or less attractive? [Write 1 if More, 2 if Less, or 3 if the Same] = [Blank 4]
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