MGMT 8500 522-capstone v80 Appendix One (Construct or lease) Objective: Should WLW lease or construct their own production facility Option 1: Construct Costs to incur Buying land, construct building and getting ready for use Taxes, insurance, and repairs (per year) Intended years of use Projected market value in 20 years Maximum down payment WLW can make Remainder in four payments of; Revenue opportunity Building annex will be leased to a tenant and will generate a lease revenue (per year) for 10 years Option 2: Lease Intended years of use First lease payment due now Operating costs to be paid by WLW $360,000 $ 34,000 20 $ 1,600,000 $ 500,000 $ 160,000 $60,000 20 $ 90,000 Rest of the lease payments (years 2-20) $ 90,000 $ 9,000 $ 26,000 $ 40,000 15% Repairs (annual) Maintenance (annual) Initial one-time deposit, will be returned in year 20 Required rate of return 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). MGMT 8500 522 capstone v20 Deliverables: 1) Written report with the following content: Appendix 1: Explain the calculations Your recommendations