Teal Mountain Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its...
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Teal Mountain Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in Western Canada. To do so. Teal Mountain has decided to locate a new factory in Kelowna, B.C. Teal Mountain will either buy or lease a site, depending on which is more advantageous. The site location committee has narrowed down the available sites to the following three buildings: Building A: Purchase for a cash price of $625,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $70,000 being made at the beginning of the year. Building C: Purchase for $670,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,100. Rental payments will be received at the end of each year. Teal Mountain has no aversion to being a landlord. Calculate the net present value of three buildings, assuming a 12% cost of funds. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to O decimal places, e.g. 5,275.) Teal Mountain Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in Western Canada. To do so. Teal Mountain has decided to locate a new factory in Kelowna, B.C. Teal Mountain will either buy or lease a site, depending on which is more advantageous. The site location committee has narrowed down the available sites to the following three buildings: Building A: Purchase for a cash price of $625,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $70,000 being made at the beginning of the year. Building C: Purchase for $670,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,100. Rental payments will be received at the end of each year. Teal Mountain has no aversion to being a landlord. Calculate the net present value of three buildings, assuming a 12% cost of funds. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to O decimal places, e.g. 5,275.)
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To calculate the net present value NPV of each building we need to calculate the present value of th... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-1119048534
11th Canadian edition Volume 1
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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