Question: if I learned the below topic in my course could help me with answer this question please with depth analysis not just send to me
if I learned the below topic in my course could help me with answer this question please with depth analysis not just send to me the simple answer
Domestic Robots R Us (DRRU), a subsidiary of AI Electronics Inc, are considering three new robots for their offering of AI driven domestic robots. Unfortunately, DRRU are subject to tight capital constraints, preventing them from putting all three robots into production should all three robots prove to create shareholder value. Indeed, the maximum investment DRRU can make this year is $55 million.
DRRUs cost of capital is 12% and the management are confident that each of the three robots or projects has the same risk as DRRUs existing projects.
| Robot/Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| Gardner Gaby (GG) | -30.00 | 12.00 | 12.87 | 13.77 | 14.73 | 15.77 | 16.87 | 18.05 | -75.00 |
| Nanny Natalie (NN) | -30.00 | 6.05 | 6.66 | 7.32 | 8.05 | 8.86 | 9.74 | 10.72 | 11.79 |
| Cook Claudio (CC) | -25.00 | 5.25 | 5.59 | 5.95 | 6.34 | 6.75 | 7.19 | 7.66 | 8.16 |
- If there were no capital constraints, what should DRRU do?
- Given the capital constraints, what do you advise DRRU to do?
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