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. Mentyy either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the aliu sites to the following three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $613,700, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $70,100 being made at the beginning of the year. Building C: Purchase for $659,100 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,470. Rental payments will be received at the end of each year. The Monty Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Monty Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
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. Mentyy either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the aliu sites to the following three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $613,700, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $70,100 being made at the beginning of the year. Building C: Purchase for $659,100 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,470. Rental payments will be received at the end of each year. The Monty Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Monty Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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. Montyy
depending upon which is more advantageous. The site location committee has narrowed down the
three very similar buildings that will meet their needs.
Building A: Purchase for a cash price of $613,700, useful life 27 years.
Building B: Lease for 27 years with annual lease payments of $70,100 being made at the beginning of the year.
Building C: Purchase for $659,100 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a
net annual rental of $6,470. Rental payments will be received at the end of each year. The Monty Inc. has no aversion to being a
landlord.
Click here to view factor tables.
In which building would you recommend that The Monty Inc. locate, assuming a 12% cost of funds? (Round factor values to 5 decimal
places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
Building A
Building B
Building C
$
$
$
ther buy or lease a site
aliu sites to the following
Net Present Value
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