The Pronghorn Inc., a manufacturer of lowsugar, lowsodium, lowcholesterol TV dinners, would like to increase its market share in
the Sunbelt. In order to do so Pronghorn has decided to locate a new factory in the Panama City area. Pronghorn 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 $ useful life years.
Building B: Lease for years with annual lease payments of $ being made at the beginning of the year.
Building C: Purchase for $ cash. This building is larger than needed; however, the excess space can be sublet for years at a
net annual rental of $ Rental payments will be received at the end of each year. The Pronghorn Inc. has no aversion to being a
landlord.
Click here to view factor tables.
In which building would you recommend that The Pronghorn Inc. locate, assuming a cost of funds? Round factor values to decimal
places, eg and final answer to decimal places, eg
Net Present Value
Building A $
Building B $
Building C $
