An entrepreneur is considering acquiring a lot of land for $50,000 and develop it into one of three options: Option A open a gas station; Option B open a laundry; Option C open a nursery

He/she intends to keep the operation going for 15 years and then sell the land and the installed operation. His/her anticipated data are:

Implementation Yearly Benefits Revenue form System sale

Option A 65,000 25,000 15,000

Option B 180,000 45,000 80,000

Option C 120,000 35,000 30,000

He/she also anticipate that in 15 years the land price has increased to $75,000, and his/her cost of capital will remain unchanged at 6.0% for the duration of the investment.

QUESTIONS

1. If the decision criteria is to maximize the Net Present Worth of the investment, which option should be selected?
2. If the decision criteria is to realize a Return On Investment not lower than 20%, which option should be selected?

Land salvage

75000

Project life (yrs)

15

Land Acquisiton		50000
	Implem.	Yearly Benefits	Equip Salvage
Option A	65,000	25,000	15,000
Option B	180,000	45,000	80,000
Option C	120,000	35,000	30,000