The Ayayal Inc, a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in theSunbelt. In order to do so, Ayayai has decided to locate a new factory in the Panama City area. Ayayai will either buy or lease a sitedepending upon which is more advantageous. The site location committee has narrowed down the available sites to the followingthree very similar buildings that will meet their needs.Building A: Purchase for a cash price of $610,000, useful life 27 yearsBuilding B: Lease for 27 years with annual lease payments of $71.570 being made at the beginning of the year.Building C: Purchase for $650.800 cash. This building is larger than needed: however, the excess space can be sublet for 27 years at anet annual rental of $6,890. Rental payments will be received at the end of each year. The Ayayal Inc has no aversion to being alandlord.Click here to view factor tablesIn which building would you recommend that The Ayayal Inc locate, assuming a 11% cost of funds? (Round factor values to 5 decimalplaces, eg. 1.25124 and final answer to 0 decimal places, es 458,581)Building ABuilding BBuilding C$$SNet Present Value610,000

Net present value (or NPV,); position: relative; display: inline-block;">Net present value (or…

Answered: The Ayayal Inc, a manufacturer of…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 2CDQ

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