Teal Inc., manufactures ice tea and would like to increase its market share in the North. In order to do so, Teal has decided to locate a new factory in the Cedar Rapid area. Teal 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 buildings: Building A: Purchase for a cash price of $1,533,000, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $126,000 being made at the beginning of the year. Building C: Purchase for $1,965,000 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $20,700. Rental payments will be received at the end of each year. Teal Inc. has no aversion to being a landlord. Click here to view factor tables In which building would you recommend that Teal Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 4,585.81.) Building A Building B Building C $ $ $ Net Present Value Teal Inc. would locate in

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Teal Inc., manufactures ice tea and would like to increase its market share in the North. In order to do so, Teal has decided to locate a
new factory in the Cedar Rapid area. Teal 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 buildings:
Building A: Purchase for a cash price of $1,533,000, useful life 26 years.
Building B: Lease for 26 years with annual lease payments of $126,000 being made at the beginning of the year.
Building C: Purchase for $1,965,000 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a
net annual rental of $20,700. Rental payments will be received at the end of each year. Teal Inc. has no aversion to being a landlord.
Click here to view factor tables
In which building would you recommend that Teal Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal
places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 4,585.81.)
Building A $
Building B
Building C
$
$
Net Present Value
Teal Inc. would locate in
4
Transcribed Image Text:Teal Inc., manufactures ice tea and would like to increase its market share in the North. In order to do so, Teal has decided to locate a new factory in the Cedar Rapid area. Teal 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 buildings: Building A: Purchase for a cash price of $1,533,000, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $126,000 being made at the beginning of the year. Building C: Purchase for $1,965,000 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $20,700. Rental payments will be received at the end of each year. Teal Inc. has no aversion to being a landlord. Click here to view factor tables In which building would you recommend that Teal Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 4,585.81.) Building A $ Building B Building C $ $ Net Present Value Teal Inc. would locate in 4
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