The pina 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, pina has decided to locate a new factory in the panama city area. pina 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 $610,600, useful life 27 years.
building b: lease for 27 years with annual lease payments of $70,870 being made at the beginning of the year.
building c: purchase for $657,200 cash. this building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,110. rental payments will be received at the end of each year.
the pina inc. has no aversion to being a landlord. in which building would you recommend that the pina 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.)