Green Jade Resorts, a Singapore company that owns and operates golf resorts, has hired you to analyze its investment opportunities in the Southwest United States and Mexico. The company managers have always used the payback method and have asked you to prepare an analysis comparing three different resorts, one near the quaint mining town of Bisbee, Arizona; another at Puerta Penasco, a beach resort area on the Baja coast of Mexico; and a third golf resort near Taos, New Mexico.
A. List four methods that could be used to analyze this long-term decision. Describe each method in your own words.
B. In your own words, describe the advantages and disadvantages of each method you identified in part (A).
C. Explain why it is not possible to perfectly predict a project’s cash flows.
D. In using quantitative results for decision making, would you place equal reliance on the results of all four analysis techniques? Explain.
E. Discuss how the managers of the Singapore Company might respond to your advice if you recommend an analysis method other than the payback method.
F. Write a brief memo to the CEO of the Singapore Company, recommending your choice of analysis methods and explaining the most important issues for the CEO to consider when choosing an analysis method.