MBA Tech

MBA Tech is negotiating with the mayor to start a manufacturing plant in an abandoned building. The city has decided to subsidize MBAT, but the form and timing of the subsidy have not been determined.

You have been asked to recommend the most favorable (lowest) subsidy for the city based on the four criteria recommended by MBAT.

Cash Flows

• year 0 = ($1,000,000)
• years 1-4 = $371,739/year

Which of the following is the lowest subsidy for the city?

• Subsidize to bring IRR to 25%
• Subsidize to provide 2 year payback
• Subsidize to provide NPV=$75,000 @ 20% discount rate
• Achieve a 40% ARR

Answer each of the question above. PLEASE SHOW WORK AND EXPLANATION.

MBA Tech MBA Tech is negotiating with the mayor to start a manufacturing plant in an abandoned building. The city has decided to subsidize MBAT, but the form and timing of the subsidy have not been determined. You have been asked to recommend the most favorable (lowest) subsidy for the city based on the four criteria recommended by MBAT. Cash Flows year 0 = ($1,000,000) years 1-4 = $371,739/year Which of the following is the lowest subsidy for the city? 1. 2. 3. 4. Subsidize to bring IRR to 25% Subsidize to provide 2 year payback Subsidize to provide NPV=$75,000 @ 20% discount rate Achieve a 40% ARR Answer each of the question above. PLEASE SHOW WORK AND EXPLANATION