Please show steps and be as detailed as possible.
Frank is the owner of a Sausage stand in New York. He is considering buying a new sausage stand versus a used one. He will sell this stand in 2 years (when he retires from his work). The new sausage stand costs $7,000 and costs $220 per month for maintenance. The used machine costs $4,000 but the maintenance costs are not certain. For the used machine, there is a chance of 25% it will cost $500 per month, and 75% it will cost $400 per month. Frank estimates that the salvage value of the new stand, after the two years, will be $3,000 while the used stand will have a salvage value of $1,500. Alternatively, Frank can hire a third-party, New York Cooks, to operate the sausage stand and prevent buying any stand. The up-front cost for hiring New York Cooks is $6,000. Nonetheless, the record for New York Cooks shows there is a chance that they might not meet the quality and sales that Frank requires. Frank estimates there is a 12% chance that New York Cooks will not meet the quality and sales required. If the quality standards are not met, then Frank has to assume a penalty of $10,000. If New York Cooks meet the requirements, then everything is fine. 1.) Assuming that Frank is not certain of the salvage value for the used stand after the two years. Perform a one-way analysis on the salvage value for the used stand and compare it to the other possible strategies. (A graph with the numerical details of the analysis is required. Additionally, assumptions of the possible high and low ranges for each strategy should be made.) Frank is the owner of a Sausage stand in New York. He is considering buying a new sausage stand versus a used one. He will sell this stand in 2 years (when he retires from his work). The new sausage stand costs $7,000 and costs $220 per month for maintenance. The used machine costs $4,000 but the maintenance costs are not certain. For the used machine, there is a chance of 25% it will cost $500 per month, and 75% it will cost $400 per month. Frank estimates that the salvage value of the new stand, after the two years, will be $3,000 while the used stand will have a salvage value of $1,500. Alternatively, Frank can hire a third-party, New York Cooks, to operate the sausage stand and prevent buying any stand. The up-front cost for hiring New York Cooks is $6,000. Nonetheless, the record for New York Cooks shows there is a chance that they might not meet the quality and sales that Frank requires. Frank estimates there is a 12% chance that New York Cooks will not meet the quality and sales required. If the quality standards are not met, then Frank has to assume a penalty of $10,000. If New York Cooks meet the requirements, then everything is fine. 1.) Assuming that Frank is not certain of the salvage value for the used stand after the two years. Perform a one-way analysis on the salvage value for the used stand and compare it to the other possible strategies. (A graph with the numerical details of the analysis is required. Additionally, assumptions of the possible high and low ranges for each strategy should be made.)
