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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Brubaker Inc., a manufacturer of high-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Brubaker has decided to locate a new factory in the Panama City area. Brubaker 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 $610,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $70,000 being made at the beginning of the year. Building C: Purchase for $650,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $6,000. Rental payments will be received at the end of each year. The Brubaker Inc. has no aversion to being a landlord. In which building would you recommend that Brubaker Inc. locate, assuming a 12% cost of funds? (Show work please)
The Splish 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, Splish has decided to locate a new factory in the Panama City area. Splish 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 $616,000, useful life 25 years.Building B: Lease for 25 years with annual lease payments of $70,700 being made at the beginning of the year.Building C: Purchase for $654,700 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $6,820. Rental payments will be received at the end of each year. The Splish Inc. has no aversion to being a landlord. In which building would you recommend that The Splish Inc. locate, assuming a 12% cost of…
The Sweet 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, Sweet has decided to locate a new factory in the Panama City area. Sweet 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 $ 615,800, useful life 28 years.Building B: Lease for 28 years with annual lease payments of $ 71,850 being made at the beginning of the year.Building C: Purchase for $ 655,900 cash. This building is larger than needed; however, the excess space can be sublet for 28 years at a net annual rental of $ 6,850. Rental payments will be received at the end of each year. The Sweet Inc. has no aversion to being a landlord.What is the Net Present Value for each alternative. In which building would you recommend…
The Monty 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, Monty has decided to locate a new factory in the Panama City area. Monty 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 $617,900, useful life 27 years.Building B: Lease for 27 years with annual lease payments of $70,330 being made at the beginning of the year.Building C: Purchase for $655,700 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,700. Rental payments will be received at the end of each year. The Monty Inc. has no aversion to being a landlord.In which building would you recommend that The Monty Inc. locate, assuming a 12% cost of funds?…
The Marigold 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, Marigold has decided to locate a new factory in the Panama City area. Marigold 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 $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 a net annual rental of $6,800. Rental payments will be received at the end of each year. The Marigold Inc. has no aversion to being a landlord. In which building would you recommend that The Marigold Inc. locate, assuming a 12%…
The Metlock 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, Metlock has decided to locate a new factory in the Panama City area, Metlock 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 $ 610,600, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $ 70,870 being made at the beginning of the year. Building C: Purchase for $ 657,200 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $ 6,110. Rental payments will be received at the end of each year. The Metlock Inc. has no aversion to being a landlord.
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The Sandhill 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, Sandhill has decided to locate a new factory in the Panama City area. Sandhill 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 $612,300, useful life 26 years.Building B: Lease for 26 years with annual lease payments of $70,170 being made at the beginning of the year.Building C: Purchase for $652,900 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $6,430. Rental payments will be received at the end of each year. The Sandhill Inc. has no aversion to being a landlord.Click here to view factor tablesIn which building would you recommend that The Sandhill…
The Bridgeport 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, Bridgeport has decided to locate a new factory in the Panama City area. Bridgeport 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 $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 a net annual rental of $6,800. Rental payments will be received at the end of each year. The Bridgeport Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend…
The Buffalo 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, Buffalo has decided to locate a new factory in the Panama City area. Buffalo 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 $618,300, useful life 27 years.Building B: Lease for 27 years with annual lease payments of $71,360 being made at the beginning of the year.Building C: Purchase for $651,500 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,090. Rental payments will be received at the end of each year. The Buffalo Inc. has no aversion to being a landlord.In which building would you recommend that The Buffalo Inc. locate, assuming a 11% cost of…

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