FROM: ACME Management – Director of Fixed Asset Procurement

We once again need your help. We are considering making a $2,000,000 purchase of equipment to help us deal with issues related to Covid-19. We believe in our research and our research tells us that this purchase will return net cash flows of $1,000,000 at the each of the first year, plus $200,000 from years 6 through 15. Plus, if the company did over $100 million in cumulative sales by the end of year 15, we would receive an additional $3,000,000. We believe there is a 70% probability that this equipment will help us achieve over $100 million in cumulative sales but we need you to help us in making the final decision.

Can you and the members of ACC 331 help us in making this decision? Oh, we assume the annual interest rate (or cost of capital) is 10% annually. Can you help us? Will you charge us for your service and if so, how much will you charge us? We need your help by May 7, 2022. After this date, we will not need your help.

REQUIRED: What questions do you have for this company? Based on the answers to your questions, please provide a decision to this company by May 8, 2022.

Answer rating: 100% (QA)

1 What type of equipment is the company considering purchasin... View the full answer