Oriole Inc

by | Aug 17, 2021 | Assignment

Problem 6-10 Oriole Inc. owns and operates a number of hardware stores in the New England region. Recently, the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building and related facilities.

Purchase: The company can purchase the site, construct the building, and purchase all store fixtures. The cost would be $1,856,100. An immediate down payment of $406,000 is required, and the remaining $1,450,100 would be paid off over 5 years at $360,700 per year (including interest payments made at end of year). The property is expected to have a useful life of 12 years, and then it will be sold for $502,100. As the owner of the property, the company will have the following out-of-pocket expenses each period.

Property taxes (to be paid at the end of each year) – $40,550Insurance (to be paid at the beginning of each year) – 26,650Other (primarily maintenance which occurs at the end of each year) – 16,660Total – $83,860Lease: First National Bank has agreed to purchase the site, construct the building, and install the appropriate fixtures for Oriole Inc. if Oriole will lease the completed facility for 12 years. The annual costs for the lease would be $266,600. Oriole would have no responsibility related to the facility over the 12 years. The terms of the lease are that Oriole would be required to make 12 annual payments (the first payment to be made at the time the store opens and then each following year). In addition, a deposit of $104,400 is required when the store is opened. This deposit will be returned at the end of the 12th year, assuming no unusual damage to the building structure or fixtures.

Compute the present value of lease vs purchase. (Currently, the cost of funds for Oriole Inc. is 9%.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

What is the Present value of the Purchase option? What is the Present value of the Lease option?

We help you get better grades, improve your productivity and get more fun out of college!!

Homework Answers Online

Free title page

Free reference page

Free formatting

Unlimited revisions

WhatsApp chat

How it works – it’s easy


Place your Order

Submit your requirements through our small easy order form. Be sure to include and attach any relevant materials.

Make a payment

The total price of your order is based on the type of assignment, number of pages, academic level and deadline.


Order process

We assign the assignment to the most qualified tutor. When the tutor completes the assignment, it is transferred to one of our professional editors to ensure that the assignment meets all of your requirements.

Once complete, we’ll send your assignment via the email provided on the order form and you’ll be able to download it. 

Achieve academic success with the best online tutors