please do it in details i want to understand each step

The Owner of your Company wants to set up an additional production line which intends to operate for 15 years. He/she knows the Companys Cost of Capital is 5.3%. Three options are available:

Item Opt. A Opt. B Opt. C

Price 50,000 100,000 150,000

O&M 5,000 6,000 7,000

Sales 20,000 30,000 40,000

Salvage 10,000 5,000

7,000

Life 5 10 15

Cost of Capital 5.30%

He/she asks you: Which option should be chosen? (( show the calculations) In the event he/she decides instead to operate the production line indefinitely (no limit on the project horizon), which option should be chosen, and how would you choose it? (( show the calculations)

Make the following simplifying assumptions: Cost of Capital will remain unchanged throughout the project horizon Sales will remain constant throughout the project horizon O&M will remain constant throughout the project horizon

11:21 MP4 ... 21% HOMEWOR...228b4b8a9e The Owner of your company wants to set up an additional production line which intends to operate for 15 years. He/she knows the Company's Cost of Capital is 5.34. Three options are available: Item Opt. B Optc Opt. A 50.000 Price 100.000 150,000 0&M 5,000 6,000 7.000 Sales 20,000 30.000 40,000 Salvage 10,000 5,000 7.000 Life 5 10 Cost of Capital 15 5.30 He/she asks you: 1) Which option should be chosen? (+ show the calculations) 2) In the event he/she decides instead to operate the production line indefinitely (no limit on the project horizon), which option should be chosen, and how would you choose it? (+ show the calculations) Make the following simplifying assumptions: a) Cost of Capital will remain unchanged throughout the project horizon b) Sales will remain constant throughout the project horizon c) O&M will remain constant throughout the project horizon d) Option B salvage value in the middle of its useful life is $20,000 ENGR 610 FALL SEMESTER 2020 HOMEWORK #4 The Owner of your Company wants to set up an additional production line which intends to operate for 15 years. He/she knows the Company's Cost of Capital is 5.3%. Three options are available: Item Opt. A Opt. B Price 50,000 100,000 O&M 5,000 6,000 Sales 20,000 30,000 Salvage 10,000 5,000 Life 5 10 Cost of Capital Opt.C 150,000 7,000 40,000 7,000 15 5.30% He/she asks you: 1) Which option should be chosen? (show the calculations) 2) In the event he/she decides instead to operate the production line indefinitely (no limit on the project 23:55 1/2 horizon), which option should be chosen, and how would you choose it? ( show the calculations) Make the following simplifying assumptions: a) Cost of Capital will remain unchanged throughout the project horizon b) Sales will remain constant throughout the project horizon c) O&M will remain constant throughout the project horizon d) Option B salvage value in the middle of its useful life is $20,000 23:55 2/2 11:21 MP4 ... 21% HOMEWOR...228b4b8a9e The Owner of your company wants to set up an additional production line which intends to operate for 15 years. He/she knows the Company's Cost of Capital is 5.34. Three options are available: Item Opt. B Optc Opt. A 50.000 Price 100.000 150,000 0&M 5,000 6,000 7.000 Sales 20,000 30.000 40,000 Salvage 10,000 5,000 7.000 Life 5 10 Cost of Capital 15 5.30 He/she asks you: 1) Which option should be chosen? (+ show the calculations) 2) In the event he/she decides instead to operate the production line indefinitely (no limit on the project horizon), which option should be chosen, and how would you choose it? (+ show the calculations) Make the following simplifying assumptions: a) Cost of Capital will remain unchanged throughout the project horizon b) Sales will remain constant throughout the project horizon c) O&M will remain constant throughout the project horizon d) Option B salvage value in the middle of its useful life is $20,000 ENGR 610 FALL SEMESTER 2020 HOMEWORK #4 The Owner of your Company wants to set up an additional production line which intends to operate for 15 years. He/she knows the Company's Cost of Capital is 5.3%. Three options are available: Item Opt. A Opt. B Price 50,000 100,000 O&M 5,000 6,000 Sales 20,000 30,000 Salvage 10,000 5,000 Life 5 10 Cost of Capital Opt.C 150,000 7,000 40,000 7,000 15 5.30% He/she asks you: 1) Which option should be chosen? (show the calculations) 2) In the event he/she decides instead to operate the production line indefinitely (no limit on the project 23:55 1/2 horizon), which option should be chosen, and how would you choose it? ( show the calculations) Make the following simplifying assumptions: a) Cost of Capital will remain unchanged throughout the project horizon b) Sales will remain constant throughout the project horizon c) O&M will remain constant throughout the project horizon d) Option B salvage value in the middle of its useful life is $20,000 23:55 2/2