The Whispering 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, Whispering has decided to locate a new factory in the Panama City area. Whispering 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 26 years. Building B: Lease for 26 years with annual lease payments of $70,880 being made at the beginning of the year. Building C: Purchase for $650,600 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $6,110. Rental payments will be received at the end of each year. The Whispering Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Whispering Inc. locate, assuming a 10% 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 $ $ $ Net Present Value 616000 844760 7681147
The Whispering 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, Whispering has decided to locate a new factory in the Panama City area. Whispering 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 26 years. Building B: Lease for 26 years with annual lease payments of $70,880 being made at the beginning of the year. Building C: Purchase for $650,600 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $6,110. Rental payments will be received at the end of each year. The Whispering Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Whispering Inc. locate, assuming a 10% 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 $ $ $ Net Present Value 616000 844760 7681147
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Oo.150.
Subject :- Account
Transcribed Image Text:The Whispering 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, Whispering has decided to locate a new factory in the Panama City area. Whispering 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 26 years.
Building B: Lease for 26 years with annual lease payments of $70,880 being made at the beginning of the year.
Building C: Purchase for $650,600 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a
net annual rental of $6,110. Rental payments will be received at the end of each year. The Whispering Inc. has no aversion to being a
landlord.
Click here to view factor tables.
In which building would you recommend that The Whispering Inc. locate, assuming a 10% 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
$
$
$
Net Present Value
616000
844760
7681147
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