- 4 1 The Daily Planet A Prime Retail Company Is Considering Buying New Land In Smallville For 900 000 To Build A High 1 (466.33 KiB) Viewed 33 times
4.1 The Daily Planet, a prime retail
company, is considering buying new land in Smallville for $900,000 to build a high tech distribution center on it. Three different buildings are being analyzed. Building Size 2 acres 4 acres 7 acres Initial Cost (excludes land) $ 750,000 $ 860,000 $ 920,000 Resale value* of land + building $ after 20-year horizon 1,600,000 $ 2,592,000 $ 2,096,000 Annual net income $ 150,000 $ 250,000 $ 225,000 Resale value considered a reduction in cost, not a benefit. Using benefit-cost ratio analysis and an 16% MARR, determine which alternative, if any, should be selected. a) Using PW, calculate the B/C Ratios of 3 building designs. [3 points] b) Conduct an incremental B/C analysis. [2 points] c) Based on your analysis, which alterative should be selected? [1 points]