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Brubaker Inc., a manufacturer of high - sugar, low - sodium, low...

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Question

Accounting

Brubaker Inc., a manufacturer of high
-
sugar, low
-
sodium, low
-
cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so
,
Brubaker has decided to locate a new factory in the Panama City area. Brubaker 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 buildings.
Building A: Purchase for a cash price of $
6
1
0
,
0
0
0
,
useful life
2
5
years.
Building B: Lease for
2
5
years with annual lease payments of $
7
0
,
0
0
0
being made at the beginning of the year.
Building C: Purchase for $
6
5
0
,
0
0
0
cash. This building is larger than needed; however, the excess space can be sublet for
2
5
years at a net annual rental of $
6
,
0
0
0
.
Rental payments will be received at the end of each year. The Brubaker Inc. has no aversion to being a landlord.
In which building would you recommend that Brubaker Inc. locate, assuming a
1
2
%
cost of funds?
(
Show me your work!
)

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