The company you work for in pursuing a job building outdoor sheds for storing bicycles for commuters.
Question:
The company you work for in pursuing a job building outdoor sheds for storing bicycles for commuters. The company is considering producing these sheds long term but wants to run a test operation of these sheds. The company has two main options they're considering: wooden sheds made with pressure treated wood, which cost a total of $194.2 each in raw wood to make, and steel sheds which cost a total of $310.4 each in raw steel. Each style of shed also costs a constant dollar value of $200 each to make. It's noted that the price of the raw wood is stated to inflate at 5.2% per year, while the price of raw steel is expected to increase at 2.9% per year. The company estimates they can make 20 of each shed each year and can sell those 20 sheds for $600 each for the wood sheds and $700 each for the steel ones. Due to space, they can't choose both of these options. If your MARR is 22% and inflation is 3.5%:
A) Identify I, i*, and f .
B) Draw out cash flow diagram for both of these options assuming you do these operations for 5 years.
C) Determine the difference between the NPV of both options Submit the answer to all these 3 in the Dropbox for the assignment. For the answer in the box below just type "1" and hit sub
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain