finance help
HP is considering to set up a plant in Melbourne to produce its HP Z2 MINI workstation in Australia. You are given the following facts about the investment. Initial investment lo = AUD180,000,000; if postponed, initial investment will rise by 14% each year of postponement Price per unit P1 = AUD5,000 per workstation or P1 = AUD3,000 per workstation with equal probability and remains unchanged thereafter C1 =AUD2,500 per workstation and remains Cost per unit unchanged thereafter Production 30,000 workstations per year forever Discount rate i = 20% Suppose this investment is one of seven plants with identical characteristics that could be built in Australia. The outcome from your initial investment will provide information about the price of workstation HP can charge from Australian customers. 1. Please calculate the net present value (at t=0) of investing today in all 1. Please calculate the net present value (at t=0) of investing today in all the seven plants as if it were a now-or-never alternative. (2 Marks) 2. Please calculate the net present value (at t=0) of investing in one plant today and then waiting one year before making a decision on the other six plants. (6 Marks) 3. Please calculate the opportunity cost of investing in all seven plants today. (2 Marks) HP is considering to set up a plant in Melbourne to produce its HP Z2 MINI workstation in Australia. You are given the following facts about the investment. Initial investment lo = AUD180,000,000; if postponed, initial investment will rise by 14% each year of postponement Price per unit P1 = AUD5,000 per workstation or P1 = AUD3,000 per workstation with equal probability and remains unchanged thereafter C1 =AUD2,500 per workstation and remains Cost per unit unchanged thereafter Production 30,000 workstations per year forever Discount rate i = 20% Suppose this investment is one of seven plants with identical characteristics that could be built in Australia. The outcome from your initial investment will provide information about the price of workstation HP can charge from Australian customers. 1. Please calculate the net present value (at t=0) of investing today in all 1. Please calculate the net present value (at t=0) of investing today in all the seven plants as if it were a now-or-never alternative. (2 Marks) 2. Please calculate the net present value (at t=0) of investing in one plant today and then waiting one year before making a decision on the other six plants. (6 Marks) 3. Please calculate the opportunity cost of investing in all seven plants today. (2 Marks)
