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The Sage 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
The Sage 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, Sage has decided to locate a new factory in the Panama City area. Sage 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 $617,900, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $70,330 being made at the beginning of the year. Building C: Purchase for $655,700 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,700. Rental payments will be received at the end of each year. The Sage Inc. has no aversion to being a landlord. Click here to view factor tables In which building would you recommend that The Sage Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Net Present Value Building A 617900 Building B 628930 Building C 602485 The Sage Inc. should locate itself in Building C Click if you would like to Show Work for this question: Open Show Work
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