The Ayayal 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, Ayayai has decided to locate a new factory in the Panama City area, Ayayai 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 $610,000, useful life 27 years Building B: Lease for 27 years with annual lease payments of $71.570 being made at the beginning of the year. Building C: Purchase for $650.800 cash. This building is larger than needed: however, the excess space can be sublet for 27 years at a net annual rental of $6,890. Rental payments will be received at the end of each year. The Ayayal Inc has no aversion to being a landlord Click here to view factor tables In which building would you recommend that The Ayayal Inc locate, assuming a 11% cost of funds? (Round factor values to 5 decimal aploces, eg. 1.25124 and final answer to O decimal places, eg 458.581) Building A Building B Building C $ $ S Net Present Value 610,000
The Ayayal 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, Ayayai has decided to locate a new factory in the Panama City area, Ayayai 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 $610,000, useful life 27 years Building B: Lease for 27 years with annual lease payments of $71.570 being made at the beginning of the year. Building C: Purchase for $650.800 cash. This building is larger than needed: however, the excess space can be sublet for 27 years at a net annual rental of $6,890. Rental payments will be received at the end of each year. The Ayayal Inc has no aversion to being a landlord Click here to view factor tables In which building would you recommend that The Ayayal Inc locate, assuming a 11% cost of funds? (Round factor values to 5 decimal aploces, eg. 1.25124 and final answer to O decimal places, eg 458.581) Building A Building B Building C $ $ S Net Present Value 610,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:The Ayayal 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, Ayayai has decided to locate a new factory in the Panama City area. Ayayai 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 $610,000, useful life 27 years
Building B: Lease for 27 years with annual lease payments of $71.570 being made at the beginning of the year.
Building C: Purchase for $650.800 cash. This building is larger than needed: however, the excess space can be sublet for 27 years at a
net annual rental of $6,890. Rental payments will be received at the end of each year. The Ayayal Inc has no aversion to being a
landlord.
Click here to view factor tables
In which building would you recommend that The Ayayal Inc locate, assuming a 11% cost of funds? (Round factor values to 5 decimal
places, eg. 1.25124 and final answer to 0 decimal places, es 458,581)
Building A
Building B
Building C
$
$
S
Net Present Value
610,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education