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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $600,000, the equipment costs $250,000, and $71,321 additional working capital is required. It is expected that the product will result in sales of $750,000 per year for 10 years, at which time the land can be sold for $400,000, the building for $350,000, and the equipment for $50,000. All of the working capital would be recovered at the EOY 10. The annual expenses for labor, materials, and all other items are estimated to total $475,000. If the company requires a MARR of 15% per year on projects of comparable risk, determine the AW of the entire cash flow diagram.
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