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A tricycle manufacturer wants to start manufacturing bicycles. He assumes that he could sell 1,000 pieces. He is considering building a new production facility in
A tricycle manufacturer wants to start manufacturing bicycles. He assumes that he could sell 1,000 pieces. He is considering building a new production facility in either Berlin or Hamburg The cost parameters of the investment alternatives differ depending on the various municipal economic development offers and other regional conditions. They are as follows: Machine Berlin Machine Hamburg acquisition cost 1 000 000 750.000 residual value 100.000 100.000 capacity 1000 pieces/year 800 pieces/year Fixed operating costs 120,000/year 70.000/year Operating costs variable 70 piece 110 /piece Selling price 400 /pieci Discount rate 5% Useful le Determine the net profitability of the two alternative locations using the static investment calculation ten years Net profitability Berlin Net profitability Hamburg
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