Appendix One (Construct or lease) Objective: Should FIH lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building and getting ready $700,000 for use Taxes, insurance, and repairs (per year) Intended years of use Projected market value in 15 years Maximum initial expenditure towards land and construction FIH is able to make Remainder in four payments of Property upgrade cost in year 7 Intended years of use Option 2: Lease First lease payment due now Rest of the lease payments (years 2-15) Operating costs to be paid by FIH Property taxes (annual) $ 43,000 15 $2,600,000 $750,000 $ 230,000 $32,000 15 $ 80,000 $ 135,000 $ 15,000 Insurance (annual) $ 25,000 Initial one-time deposit security deposit, will be $ 65,000 returned in year 15 Property upgradation cost in year 7, half of which $32,000 will be borne by FIH Property restoration expense at the end of the lease term in year 15 Required rate of return $ 70,000 14% Methodology: The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option (construction or leasing).