Question
Exercise 10.- The BCNDM company is studying two equivalent production lines from a technical point of view. In particular, the two options under study are
Exercise 10.- The BCNDM company is studying two equivalent production lines from a technical point of view. In particular, the two options under study are capable of processing 1,375 product units per month, but there are differences between them in the cost structure that are detailed below: Option 1: Initial payment of 460,000.00; duration of the line 4 years; the annual costs associated with its operation are: fixed costs of 3,500.00 the first year, increasing each year by 2.4% variable costs of 5.00/unit the first year, increasing each year by 2.4% The withdrawal value of the line is null. Option 2: Initial payment of 420,000.00; duration of the line 3 years; the total annual costs associated with its operation are: 120,150.00 the first year, increasing each year by 2.4% The withdrawal value of the line is 10,000.00. The sale price of each unit of product manufactured on the line is 20.00 the first year, increasing each year by 3.2%. Considering that the desired real rate of return on the line is 21.0% and that inflation is constant over successive years and equal to 3.0%, advise, explaining the decision made through some form of calculation and commenting on the value obtained, on: 1. The one that you consider the best option for the company. 2. In the event that a real rate of return is desired that is 20% higher than that considered in the previous section, keeping inflation constant at 3.0%, would you change your advice?
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