The Blossom Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in theSunbelt. In order to do so, Blossom has decided to locate a new factory in the Panama City area. Blossom will either buy or lease a sitedepending upon which is more advantageous. The site location committee has narrowed down the available sites to the followingthree very similar buildings that will meet their needs.Building A: Purchase for a cash price of $611,000, useful life 25 years.Building B: Lease for 25 years with annual lease payments of $71,370 being made at the beginning of the year.Building C: Purchase for $657,400 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at anet annual rental of $6,800. Rental payments will be received at the end of each year. The Blossom Inc. has no aversion to being alandlord.Click here to view factor tablesIn which building would you recommend that The Blossom Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimalplaces, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)Building ABuilding BBuilding C$$Net Present Value

Answer : Cumulative PV factor at 12% for 25 Years = 7.84314 (From table )

Sunbelt. In order to do so, Blossom has decided to locate a new factory in depending upon which is more advantageous. The site location committe three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $611,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $71,370 be Building C: Purchase for $657,400 cash. This building is larger than need net annual rental of $6,800. Rental payments will be received at the end landlord. Click here to view factor tables In which building would you recommend that The Blossom Inc. locate, as places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)

Sunbelt. In order to do so, Blossom has decided to locate a new factory in depending upon which is more advantageous. The site location committe three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $611,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $71,370 be Building C: Purchase for $657,400 cash. This building is larger than need net annual rental of $6,800. Rental payments will be received at the end landlord. Click here to view factor tables In which building would you recommend that The Blossom Inc. locate, as places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 2CDQ

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