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Which alternative makes the best economic sense

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O'Neal Consumer product library is in need of 150,000 sq. ft. of warehouse space for its Eat Coast market, where annual sales are $30,000,000. If a public warehouse is used, annual costs can be estimated as $600,000 for handling and $300,000 for storage. If leased space is used, the annual lease cots is $3 per sq. ft. for a ten-year lease. Leased-space operating cost is $250,000 per year. Equipment and start-up costs are $40,000 which can be depreciated over a seven-year period. A straight-line depreciation schedule is to be used. The company's required return on project is 11 percent after taxes, and its federal tax rate is 35 percent per year.

Question 1: Which alternative makes the best economic sense?

Reference no: EM132555636

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