Victorla Enterprises Inc. Is evaluating alternative uses for a three$-$storey manufacturing and warehousing building that it has purchased

for $$1,450,000.$ The company could continue to rent the building to the present occupants for $$61,000$ per year. These tenants have

Indicated an interest in staying in the building for at least another $15$ years. Alternatively, the company could make improvements to

modify the existing structure to use for Its own manufacturing and warehousing needs. VIctorla's production engineer feels the

bullding could be adapted to handle one of two new product lines. The cost and revenue data for the two product alternatives follow:

The building will be used for only $15$ years for elther product $A$ or product $B.$ After $15$ years, the bullding will be too small for efficlent

production of either product line. At that time, Victorla plans to rent the building to firms similar to the current occupants. To rent the

bullding again, Victoria will need to restore the building to its present layout. The estimated cash cost of restoring the bullding if

product A has been undertaken is $$55,000$; If product B has been produced, the cash cost will be $$80,000.$ These cash costs can be

deducted for tax purposes in the year the expenditures occur.

Victorla will depreciate the original building shell $($purchased for $$1,450,000)$ at a CCA rate of $5$ percent, regardless of which alternative

It chooses. The building modifications are depreciated using the straight$-$line method over a $15-$year life. Equipment purchases for

either product are in class $8$ and have a CCA rate of $20$ percent. The firm's tax rate is $34$ percent, and its required rate of return on

such investments is $12$ percent.

For simplicity, assume all cash flows for a given year occur at the end of the year. The initial outflows for modifications and equipment

will occur at $t=0,$ and the restoration outflows will occur at the end of year $15.$ Also, Victorla has other profitable ongoing operations

that are sufficlent to cover any losses. $($Negative amount should be Indicated by a minus sign. Do not round intermedlate

calculations. Round the answers to $2$ decimal places. Omit $ sign In your response.$)$

a$.$ Calculate the NPV for Product $A.$

NPV $

b$.$ Calculate the NPV for Product $B.$

NPV $

c$.$ Which use of the bullding would you recommend to management?