Case 2: Bell, T., & Fergus, A., (2017). Peregrine: The CNC machine decision. In SAGE Business Cases. SAGE Publications, Ltd.,

https://www-doi- org.ezproxy.library.berkeley.org/10.4135/9781526446275 This case is directed on your learning in Week 3 and earlier. The learning objectives are Use NPV calculations to analyze various options in a real-world decision. Consider qualitative information that may override their quantitative analysis. Perform sensitivity analysis on key variables of an investment decision (changing the discount rate).

Case Questions Use 7% annual discount rate for the NPV analysis. IGNORE THE QUESTIONS WITHIN THE CASE. USE THE QUESTIONS BELOW FOR YOUR ANALYSIS. 1. Analyze the core problem facing French and discuss the objectives he might wish to achieve when resolving the problem. 2. Without using any numbers, identify the strengths and weaknesses of the three options identified by French. Are there any other options French should consider?

3. Compute and compare the net present value and payback period of each option using the discount rate of 7%. 4. Analyze the results if the discount rate of 5% was used. 5. Based on your reading of Hodder, J. E., & Riggs, H. E. (1985), apply your learning to address the risks associated in Peregrine's decision making: a) risks associated with each alternative; b) challenges in using NPV as an evaluation tool.