Question: A Japan-based architectural firm has asked a United States-based software engineering group to infuse GPS sensing capability via satellite into monitoring software for high-rise
A Japan-based architectural firm has asked a United States-based software engineering group to infuse GPS sensing capability via satellite into monitoring software for high-rise structures in order to detect greater than expected horizontal movements. This software could be very beneficial as an advance warning of serious tremors in earthquake-prone areas in Japan and the United States. The inclusion of accurate GPS data is estimated to increase annual revenue over that for the current software system by $200,000 for each of the next 2 years, and by $300,000 for each of years 3 and 4. The planning horizon is only 4 years due to the rapid advances made internationally in building-monitoring software. Develop Microsoft Excel spreadsheets to answer the questions below. (a) Determine the total interest and total revenue after 4 years, using a compound rate of return of 8% per year. (b) Repeat part (a) if estimated revenue increases from $300,000 to $600,000 in years 3 and 4. (c) Repeat part (a) if inflation is estimated to be 4% per year. This will decrease the real rate of return from 8% to 3.85% per year.
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