1. ABC Corp. owns a piece of land and building a few miles from its headquarters
ID: 1183462 • Letter: 1
Question
1. ABC Corp. owns a piece of land and building a few miles from its headquarters. The land originally cost ABC $500,000 to purchase. ABC is considering using the facility for a new training program. It could also rent a building about the same distance from its headquarters for $20,000 a year. A developer has offered ABC $2.5 million for its property. What factors should ABC consider when deciding whether or not to use its own facility or to sell it and rent the other building? What would you recommend?Explanation / Answer
He should definitely sell his land. His profit upon selling the land will be $2.5 mn - $0.5 mn = $2 mn Now rent = $20,000 a year. Basically he can rent the building for ( 2,000,000 / 20,000) years ie 100 years without losing his own capital
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