Sigma Auto parts produces wheel hub assemblies for the automobile industry. The firm is looking at setting up a distribution center in the northern part of Taiwan. The firm' supply chain manager is considering a choice between two distribution center locations (Keelung City, and Taoyuan City). A lease at the Keelung City location costs $1000 per month with a payment of $2000 up front to guarantee the 3 year lease. The Taoyuan City location would cost $1200 per month and would be leased from month to month. The anticipated revenue in either location is $1500 per month. The estimated rate of return is 10% per year. 

Calculate net present value at the Keelung City location?

Calculate net present value at the Taoyuan City location?

Answer rating: 100% (QA)

To calculate the net present value NPV at the Keelung City location we need to consider the cash flows associated with the lease payments and the anticipated revenue over a 3year period The NPV takes ... View the full answer