Question: b) In addition to its data centre in Texas, BitTech currently has 1,000 servers located in Singapore. These are deployed for cloud services. With the

b) In addition to its data centre in Texas, BitTech currently has 1,000 servers located in Singapore. These are deployed for cloud services. With the advent of AI technologies such as Google Bard, OpenAI chatGPT and Microsoft coPilot, BitTech is thinking about pivoting from cloud services to AI services. It is evaluating whether it should pivot 500 servers to the new AI services. These 500 servers have a remaining shelf-life of 7 years. At the end of this period, all these servers will be written-off with zero book value. Presently in Singapore, monthly sales per server are $24,000. Operating costs per server are $5,000 a month. It expects sales of cloud services to decline by 5% each year. Costs per server (for cloud services) are expected to increase by a gradual 3% per year. On the other hand, monthly sales per server for AI services are estimated to be $36,000. However, operating costs per server are higher at $10,000 per month. Sales of AI services are expected to increase by a hefty 15% each year. The costs of operating such servers will also increase by 12% per year. For all its projects, BitTech uses a minimum ROI target of 18%.

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