E7-14. Present Value of an Ordinary Annuity, Present Value of Annuity Due, Best Alternative. Bella D’oro wants to open a new factory in New Jersey. The company can either purchase or lease the...

EXCEL

Extracted text: E7-14. Present Value of an Ordinary Annuity, Present Value of Annuity Due, Best Alternative. Bella D’oro wants to open a new factory in New Jersey. The company can either purchase or lease the factory. There are three options available for Bella D’oro: 1. Purchase a factory with a useful life of 20 years today for $500,000 in cash. This factory has no additional space for rent. 2. Lease a factory with annual lease payments of $50,000 for 20 years. Payments are made at the beginning of each year. 3. Purchase a factory with a useful life of 20 years today for $550,000. In addition, the company can rent some additional space for annual rent of $5,000. Assume Bella D’oro would receive the rental payments at the end of each year. Interest is compounded annually. Which option should Bella D’oro choose given a 10% interest rate?