1. Analysis of Alternatives Brubaker Inc., a manufacturer of high-sugar, low-sodium, lowcholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Brubakerhas decided to locate a new factory in the Panama City area. Brubaker will either buy or lease a sitedepending 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 $610,000, useful life 25 years.Building B: Lease for 25 years with annual lease payments of $70,000 being made at the beginning of theyear.Building C: Purchase for $650,000 cash. This building is larger than needed; however, the excess spacecan be sublet for 25 years at a net annual rental of $6,000. Rental payments will be received at the end ofeach year. Brubaker Inc. has no aversion to being a landlord.Instructions:In which building would you recommend that Brubaker Inc. locate, assuming a 12% cost of funds?2. Analysis of Alternatives Ellison Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The Engineering Department has determined that each vendor’s punch press is substantially identical and each has a useful lifeof 20 years. In addition, Engineering has estimated that required year-end maintenance costs will be $1,000per year for the first 5 years, $2,000 per year for the next 10 years, and $3,000 per year for the last 5 years.Following is each vendor’s sale package.Vendor A: $55,000 cash at time of delivery and 10 year-end payments of $18,000 each. Vendor A offersall its customers the right to purchase at the time of sale a separate 20-year maintenance service contract,under which Vendor A will perform all year-end maintenance at a one-time initial cost of $10,000.Vendor B: Forty seminannual payments of $9,500 each, with the first installment due upon delivery.Vendor B will perform all year-end maintenance for the next 20 years at no extra charge.Vendor C: Full cash price of $150,000 will be due upon delivery.Instructions:Assuming that both Vendor A and B will be able to perform the required year-end maintenance, thatEllison’s cost of funds is 10%, and the machine will be purchased on January 1, from which vendor shouldthe press be purchased?
a PurchasesYear 61000025 Lease Payments 70000 PurchasesYearAnnual rate 650000256000 Option A $10,370,039.29 Option B ($9,333,370.90) Option CRentals $11,050,041.86($800,003.22) He should…