Question

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 $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 Whispering Inc. has no aversion to being a landlord.

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In which building would you recommend that The Whispering 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		$enter a dollar amount rounded to 0 decimal places
Building B		$enter a dollar amount rounded to 0 decimal places
Building C		$enter a dollar amount rounded to 0 decimal places

The Whispering Inc. should locate itself i

Answer 1

The whisperintg inc . a manufacturer of low ; sugar ,low sodium ,low cholesterol TV dinner ,would like to increase its markets share in the sunbelt.
The ohisperin9 inc. amanufacturer of loco -Sugal ,lc-cd lum las cholestrol Tvdinecs, cald Ao increase it mante }ike shane n the Sunblet. Balding A Punchase for a cash Price of $618.300, usekl ife 87 Yeuns cash Price G18300 (odftoc e present value (618300) BLease for an Years aoth amual lease Payment the beshing o Building he yea a4 of 71, 360 being made loase Paymed $71360 So Years at the beg:nng of cach Yean Piesent alue 71360 y Pre Sent value annualde otoY 27 Yeas -$71360 x PVAD F (11. 27 Yyecs) 71360 x 948806 $ 677068 (outPlo wet resead valle 36T1068)

fo 6515oo cash, this building is Cuilding c Purchase large han needed cash GS 1500 (otloc) Price at the Co go tor 22 Yean Reat received by sublet end af each Year Present yalue of nflow 23 6030x Preseed value annuely Sector 7) :36090y PVAP C11. 7years) $ 6090 y 8.547 8o -$ 52056 (nPlow met present Value 651500 S2056 -99444 (outloa) $599 444) AnscvenBuldng the bes oton de to opv.