Financial accounting
Financial accounting
3rd Edition
ISBN: 9780077506902
Author: David J Spieceland Wayne Thomas Don Herrmann
Publisher: Mcgraw-Hill
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Chapter C, Problem C.3BP

Determine present value alternatives (LO C–2, C–3)

Star Studios is looking to purchase a new building for its upcoming film productions. The company finds a suitable location that has a list price of $1,600,000. The seller gives Star Studios the following purchase options:

  1.    Pay $1,600,000 immediately.

  2.    Pay $600,000 immediately and then pay $150,000 each year over the next 10 want, with the first payment due in one year.

  3.    Make 10 annual installments of $250,000, with the first payment due in one war.

  4.    Make a single payment of $2,300,000 at the end of five wars.

Required:

Determine the lowest-cost alternative for Star Studios, assuming that the company can borrow funds to finance the purchase at 8%.

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Star Studios is looking to purchase a new building for its upcoming film productions. The company finds a suitable location that has a list price of $1,600,000. The seller gives Star Studios the following purchase options: 1. Pay $1,600,000 immediately. 2. Pay $600,000 immediately and then pay $150,000 each year over the next 10 years, with the first payment due in one year. 3. Make 10 annual installments of $250,000, with the first payment due in one year. 4. Make a single payment of $2,300,000 at the end of five years. Required: Determine the lowest-cost alternative for Star Studios, assuming that the company can borrow funds to finance the purchase at 8%.
what is the sale price?
Alissa Stack has identified an industrial building to purchase to be leased to Jesse's Shoes for light manufacturing. She has located a property that Jesse's shoes will leased (triple-net) for $2,000,000 per year. She believe she can purchase property for a 6.25% cap rate. What is the price of the of the industrial building?
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