Imagine your boss asks you to look at a 3-year contract. After some quick analysis, you determine that prices in China and Ukraine will rise even as prices in the Netherlands and the U.S. decrease (see the following table). You expect this lawn mower to be a big hit with sales increasing as follows: Year 1: 36,000 (3,000 per month) Year 2: 72,000 (6,000 per month) Year 3: 108,000 (9,000 per month) Year China Eastern Europe Western Europe United States 1 $58.86 $80.77 $105.40 $126.23 2 $67.69 $90.47 $103.20 $119.92 3 $74.46 $97.71 $101.23 $117.52 Calculate the net present value (NPV) for each supply option using a 10% cost of capital. Which supplier would you choose now? Why?
Imagine your boss asks you to look at a 3-year contract. After some quick analysis, you determine that prices in China and Ukraine will rise even as prices in the Netherlands and the U.S. decrease (see the following table). You expect this lawn mower to be a big hit with sales increasing as follows: Year 1: 36,000 (3,000 per month) Year 2: 72,000 (6,000 per month) Year 3: 108,000 (9,000 per month) Year China Eastern Europe Western Europe United States 1 $58.86 $80.77 $105.40 $126.23 2 $67.69 $90.47 $103.20 $119.92 3 $74.46 $97.71 $101.23 $117.52 Calculate the net present value (NPV) for each supply option using a 10% cost of capital. Which supplier would you choose now? Why?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Imagine your boss asks you to look at
a 3-year contract. After some quick
analysis, you determine that prices in
China and Ukraine will rise even as
prices in the Netherlands and the U.S.
decrease (see the following table). You
expect this lawn mower to be a big hit
with sales increasing as follows:
Year 1: 36,000 (3,000 per month)
Year 2: 72,000 (6,000 per month)
Year 3: 108,000 (9,000 per month)
Year China Eastern Europe Western
Europe United States
1 $58.86 $80.77 $105.40 $126.23
2 $67.69 $90.47 $103.20 $119.92
3 $74.46 $97.71 $101.23 $117.52
Calculate the net present value (NPV)
for each supply option using a 10%
cost of capital. Which supplier would
you choose now? Why?
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