The Stewart Cake Factory owns a building for its operations. Stewart uses only half of the building and is considering two options for the unused space. The Candy Store would like to purchase the half of the building that is not being used for $550,000. A 7% commission would have to be paid at the time of purchase. Ice Cream Delight would like to lease the half of the building for the next 5 years at $100,000 each year. Stewart would have to continue paying $9,000 of property taxes each year and $1,000 of yearly insurance on the property, according to the proposed lease agreement.
Determine the differential income or loss from the lease alternative.

Question

Quizplus · Accepted Answer

The Answer of The Stewart Cake Factory owns a building for its operations. Stewart uses only half of the building and is considering two options for the unused space. The Candy Store would like to purchase the half of the building that is not being used for $550,000. A 7% commission would have to be paid at the time of purchase. Ice Cream Delight would like to lease the half of the building for the next 5 years at $100,000 each year. Stewart would have to continue paying $9,000 of property taxes each year and $1,000 of yearly insurance on the property, according to the proposed lease agreement.
Determine the differential income or loss from the lease alternative.

The Stewart Cake Factory Owns a Building for Its Operations