Business, 08.03.2021 19:30 kaylamcph7844

Close Knit has decided to locate a new factory in Worcester, MA. The company will either buy or lease a site depending on which is more advantageous. Calculate the present value of each of the following 3 scenarios and make a recommendation to Close Knit assuming an interest rate of 12%. a. Building A – Purchase for a cash price of $600,000, useful life is 25 years
b. Building B – Lease for 25 years with annual lease payments of $69,000 being made at the beginning of each year
c. Building C – Purchase for $650,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,000. Rental payments will be received at the end of each year, and Close Knit has no aversion to being a landlord.

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Close Knit has decided to locate a new factory in Worcester, MA. The company will either buy or leas...

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