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Analysis of Alternatives Ch. 5 - Time Value of Money Inguinal Services, Corp. is looking...

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Accounting

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Analysis of Alternatives Ch. 5 - Time Value of Money Inguinal Services, Corp. is looking for a new building to expand its production. After an exhaustive search, the following sites were leading contenders: 1. Building A: Purchase for $600,000 cash. 2. Building B: Lease for 25 years with annual lease payments of $69,000 made at the beginning of each of the 25 years. 3. Building C: Purchase with a note requiring both (1) 25 payments (made at the end of each of the 25 years) of $70,000 and (2) a single payment of $600,000 at the end of the 25th year. 4. Building D: Purchase with $200,000 down and a note requiring payments of $45,000 made at the beginning of each of the next 25 years. Assume Inguinal will be buying one of these buildings on 1/1/19. Additionally assume each building has a useful life of 25 years and that the prevailing interest rate is 12%. INSTRUCTIONS: 1. Calculate the cost of each building. You must show the formula(s) you will use and the variables you know for each building along with your calculation of its cost. 2. Which building has the lowest cost? Write out the journal entry for the building's purchase. What is the total cost of financing that purchase? Show your calculations

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