Question
Procter & Gamble (P&G) is considering investing in new technology to improve its manufacturing process for laundry detergent. The company is evaluating two options: Option
Procter & Gamble (P&G) is considering investing in new technology to improve its manufacturing process for laundry detergent. The company is evaluating two options: Option A involves purchasing state-of-the-art equipment for $5 million, while Option B involves leasing the equipment for an annual fee of $1.2 million for five years.
Investment Option | Initial Investment | Annual Cost | Duration |
Option A (Purchase) | $5,000,000 | - | - |
Option B (Lease) | - | $1,200,000 | 5 years |
Analyze the financial implications of each option, considering factors such as net present value (NPV), internal rate of return (IRR), payback period, and risk. Discuss the strategic considerations P&G should take into account when deciding between the two options, including potential long-term benefits and risks associated with each.
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