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The Crane Inc

Accounting

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The Crane 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, Crane has decided to locate a new factory in the Panama City area. Crane 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 $613,000, useful life 26 years.

 

Building B: Lease for 26 years with annual lease payments of $71,950 being made at the beginning of the year.

 

Building C: Purchase for $655,100 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $6,900. Rental payments will be received at the end of each year. The Crane Inc. has no aversion to being a landlord.

 

 

In which building would you recommend that The Crane 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 Crane Inc. should locate itself in select a building