Mr. Don is the director of A-Design Inc., a federally incorporated company in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry. A-Design invested $100,000 in a production machine, which has a useful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned to offer two purchasing options to the clients of his company. Option 1: $250 deposit upfront $500 yearly fee for 5 years Option 2: $1300 deposit upfront $300 yearly fee for 3 years Do a discounted cash flow analysis and determine the best option offered by Mr. Don to his clients, assuming a 10 % per year compound interest rate.
Mr. Don is the director of A-Design Inc., a federally incorporated
company in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry. A-Design invested $100,000 in a production machine, which has a useful life of 10 years, and put $10,000 in its bank account.
In an attempt to improve company sales and profits, Mr. Don planned to
offer two purchasing options to the clients of his company.
Option 1:
$250 deposit upfront
$500 yearly fee for 5 years
Option 2:
$1300 deposit upfront
$300 yearly fee for 3 years
Do a discounted cash flow analysis and determine the best option offered by Mr. Don to his clients, assuming a 10 % per year
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