The Pronghorn Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to i the Sunbelt. In order to do so, Pronghorn has decided to locate a new factory in the Panama City area. Pr lease a site depending upon which is more advantageous. The site location committee has narrowed dow following three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $618,100, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $70,340 being made at the beginning of the Building C: Purchase for $653,200 cash. This building is larger than needed; however, the excess space ca net annual rental of $6,540. Rental payments will be received at the end of each year. The Pronghorn Inc. landlord.
The Pronghorn Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to i the Sunbelt. In order to do so, Pronghorn has decided to locate a new factory in the Panama City area. Pr lease a site depending upon which is more advantageous. The site location committee has narrowed dow following three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $618,100, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $70,340 being made at the beginning of the Building C: Purchase for $653,200 cash. This building is larger than needed; however, the excess space ca net annual rental of $6,540. Rental payments will be received at the end of each year. The Pronghorn Inc. landlord.
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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Question
![-
Your answer is partially correct.
The Pronghorn 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, 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 $618,100, useful life 26 years.
Building B: Lease for 26 years with annual lease payments of $70,340 being made at the beginning of the year.
Building C: Purchase for $653,200 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a
net annual rental of $6,540. 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 12% cost of funds? (Round factor values to 5 decimal
places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
Building A
Building B
$
$
Building C $
Net Present Value
618100
574520](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F51a2b74f-be69-4a8b-86ec-2c29e5c62b36%2F22af574f-bc30-4564-9ac2-54972fa90661%2Ftlbvjw_processed.png&w=3840&q=75)
Transcribed Image Text:-
Your answer is partially correct.
The Pronghorn 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, 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 $618,100, useful life 26 years.
Building B: Lease for 26 years with annual lease payments of $70,340 being made at the beginning of the year.
Building C: Purchase for $653,200 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a
net annual rental of $6,540. 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 12% cost of funds? (Round factor values to 5 decimal
places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
Building A
Building B
$
$
Building C $
Net Present Value
618100
574520
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