Question
The Sarasota 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 Sarasota 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, Sarasota has decided to locate a new factory in the Panama City area. Sarasota 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 $ 616,000, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $ 70,880 being made at the beginning of the year. Building C: Purchase for $ 650,600 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $ 6,110. Rental payments will be received at the end of each year. The Sarasota Inc. has no aversion to being a landlord. Click here to view factor tables In which building would you recommend that The Sarasota Inc. locate, assuming a 10% 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.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started