The Cullumber Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share inthe Sunbelt. In order to do so, Cullumber has decided to locate a new factory in the Panama City area. Cullumber will either buy orlease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to thefollowing 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 at anet annual rental of $6,850. Rental payments will be received at the end of each year. The Cullumber Inc. has no aversion to being alandlord.Click here to view factor tables.In which building would you recommend that The Cullumber Inc. locate, assuming a 11% cost of funds? (Round factor values to 5decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)Net Present ValueBuilding A$Building B$Building C$The Cullumber Inc. should locate itself inBuilding B

Lease option - It is an agreement that provides a renter an option to purchase the rented property…

Answered: The Cullumber Inc., a manufacturer of…

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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