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? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)     Net Present Value Building A   $ Building B   $  Building C   $  The Monty Inc. should locate itself in:

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

   
Net Present Value
Building A
  $
Building B
 
Building C
 

The Monty Inc. should locate itself in: 

 
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