Question & Answer: The Kingbird Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its mar…..

Exercise 6-12

The Kingbird 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, Kingbird has decided to locate a new factory in the Panama City area. Kingbird 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 $610,000, useful life 27 years.

Building 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 a net annual rental of $6,890. Rental payments will be received at the end of each year.

The Kingbird Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Kingbird Inc. locate, assuming a 11% 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 $

Building B $

Building C $

The Kingbird Inc. should locate itself in Building…?

Expert Answer

 

Question & Answer: The Kingbird Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its mar..... 1

Question & Answer: The Kingbird Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its mar..... 2

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