The Carla Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its...
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The Carla 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, Carla has decided to locate a new factory in the Panama City area. Carla 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 $610.600, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $70,870 being made at the beginning of the year. Building C: Purchase for $657.200 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6.110. Rental payments will be received at the end of each year. The Carla Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Carla Inc. locate, assuming a 12% 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.) Building A Building B Building C $ $ $ Net Present Value The Carla Inc. should locate itself in 610600 Building C The Carla 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, Carla has decided to locate a new factory in the Panama City area. Carla 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 $610.600, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $70,870 being made at the beginning of the year. Building C: Purchase for $657.200 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6.110. Rental payments will be received at the end of each year. The Carla Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Carla Inc. locate, assuming a 12% 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.) Building A Building B Building C $ $ $ Net Present Value The Carla Inc. should locate itself in 610600 Building C
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Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
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