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1). Corner lot investor The Situation Your friend has a corner lot and wants to use it in an investment that would yield at least

1).

Corner lot investor

The Situation

Your friend has a corner lot and wants to use it in an investment that would yield at least 6%. He has studied many possibilities and has arrived at the following two alternatives.

Build Gas Station

Build Ice Cream Stand

Initial cost

80,000

120,000

Annual property taxes

3,000

5,000

Annual income

11,000

16,000

Life of building (years)

20

20

Salvage Value (value at end of useful life)

0

0

Decision Analysis

What are the decision alternatives? Develop the business model for each alternative. (Recall the input table and the linking of cash flow to input table.)

Perform sensitivity analysis on key outputs in relation to input parameters. Based on your analysis, which alternative would you recommend to your friend?

Note: This is Data Analysis & Decision Making Question

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