The Cullumber 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, Cullumber has decided to locate a new factory in the Panama City area. Cullumber 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 $612,100, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $71,490 being made at the beginning of the year. Building C: Purchase for $655,200 cash. This building is larger than needed; however, the excess space can be sublet for 26 years a net annual rental of $6,850. Rental payments will be received at the end of each year. The Cullumber Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Cullumber Inc. locate, assuming a 11% cost of funds? (Round factor values to 5
The Cullumber 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, Cullumber has decided to locate a new factory in the Panama City area. Cullumber 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 $612,100, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $71,490 being made at the beginning of the year. Building C: Purchase for $655,200 cash. This building is larger than needed; however, the excess space can be sublet for 26 years a net annual rental of $6,850. Rental payments will be received at the end of each year. The Cullumber Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Cullumber Inc. locate, assuming a 11% cost of funds? (Round factor values to 5
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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