Krill Electronics is looking for a new rental space for one of its manufacturing lines.
The first rental space, on Park Street, requires a 2-year lease with the total cost of the lease ($88901) due at the time of signing. The rental space has annual utilities of $22216. It will allow Krill to manufacture 36650 more units per year than it currently does at a profit of $3.11 per unit. If the unit is undamaged at the end of the 2-year lease, the rental company will return 2% of the initial lease amount.
The second rental space, on Boardwalk Avenue, requires a 6-year lease, with the total cost of the lease ($205980) due at the time of signing. The rental space has annual utilities of $19348. In this space, Krill will be able to manufacture 56429 more units per year than it currently does at a profit of $3.11 per unit. The larger space will require 2 more employees than the Park Street space at a cost of $46139 per employee per year.
Krill uses a MARR of 2% to evaluate financial decisions.
Using present worth analysis, what is the present worth of renting the space on Park Street?
(Assume all of the units manufactured can be sold.