Calisto Launch Services is an independent space corporation and has been contracted to develop and launch one of two different satellites. Initial equipment will cost $750,000 for the first satellite and $850,000 for the second. Development will take 5 years, at an expected cost of $150,000 per year for the first satellite, $120,000 per year for the second. The same launch vehicle can be used for either satellite and will cost $275,000 at the time of the launch 5 years from now. At the conclusion of the launch, the contracting company will pay Calisto $2,500,000 for either satellite. Calisto is also considering launching both satellites. Because Calisto would have to upgrade its facilities to handle two concurrent projects, the initial costs would rise by $150,000 in addition to the first costs of each satellite. Calisto would need to hire additional engineers and workers, raising the yearly costs to a total of $400,000. An extra compartment would be added to the launch vehicle at an additional cost of $75,000. As an incentive to do both, the contracting company will pay for both launches plus a bonus of $1,000,000.

Chapter 06, Problem 071 Calisto Launch Services is an independent space corporation and has been contracted to develop and launch one of two different satellites. Initial equipment will cost $750,000 for the first satellite and $850,000 for the second. Development will take 5 years, at an expected cost of $150,000 per year for the first satellite, $120,000 per year for the second. The same launch vehicle can be used for either satellite and will cost $275,000 at the time of the launch 5 years from now. At the conclusion of the launch, the contracting company will pay Calisto $2,500,000 for either satellite. Calisto is also considering launching both satellites. Because Calisto would have to upgrade its facilities to handle two concurrent projects, the initial costs would rise by $150,000 in addition to the first costs of each satellite. Calisto would need to hire additional engineers and workers, raising the yearly costs to a total of $400,000. An extra compartment would be added to the launch vehicle at an additional cost of $75,000. As an incentive to do both, the contracting company will pay for both launches plus a bonus of $1,000,000 Show the comparisons and external rates of return used to reach this decision: ERR 1: Comparison 1: Comparison 2: carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is 0.2. Using an external rate of return analysis with a MARR of 10%/year, what should Calisto Launch Services do? ERR 2 Click here to access the TVM Factor Table Calculator