Concord Inc., manufactures ice tea and would like to increase its market share in the North. In order to do so, Concord has decided to
locate a new factory in the Cedar Rapid area. Concord 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 buildings:
Building A: Purchase for a cash price of $1,550,000, useful life 26 years.
Building B: Lease for 26 years with annual lease payments of $126,000 being made at the beginning of the year.
Building C: Purchase for $1,950,000 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a
net annual rental of $20,400. Rental payments will be received at the end of each year. Concord Inc. has no aversion to being a
landlord.
Click here to view factor tables,
In which building would you recommend that Concord Inc. locate, assuming a 11% cost of funds? (Round factor values to 5 decimal
places, eg. 1.25124 and final answers to 2 decimal places, e.g. 4,585.81.)
Net Present Value
Building A
$
Building B
$
Building C
$
Concord Inc. would locate in
Building B
