The Big Company is considering the following investment alternatives with the objective of increasing sales of Product P. You have been asked to evaluate each option:

Investment A: Purchase new machinery with the capacity to increase production of Product P. The machine will cost $501,000 and Big has experience with this type of equipment. Given that this investment is considered to have a reasonably low risk associated with it, the company appropriately selected a 6% required rate of return (discount rate).

Investment B: Purchase new machinery that is also believed to have the capacity to increase production of Product P. This machine will cost $520,000. This type of machinery uses new technology that has not been fully tested so there are some concerns about its actual productivity. The company chose an 8% required rate of return (discount rate).

Investment C: Purchase new machinery that is also believed to have the capacity to increase production, but again, there is concern that the new technology that this machine uses has not been fully tested. This machine will cost $525,000. However, instead of producing Product P, Big would enter a new market by producing Product Q. Big has little familiarity with marketing Product Q. The company chose a 10% required rate of return (discount rate).

	Projected annual cash inflows associated with each Investment option
Year	Investment A	Investment B	Investment C
Required Rate of Return	6%	8%	10%
Annual cash inflows	$ 119,000	$116,000	$106,000
Number of years cash flow is expected	5	6	8

Your case analysis should be presented in a report format with the following parts:

I. Case analysis overview. Here you should specifically identify the objective of your analysis of the Investment opportunities.

II. Why did the company select different required rates of return for each investment? The required rate of return for Investment B is greater than Investment A, and even greater for Investment C. Why does the company expect greater returns for Investments B and C?

III. Considering all methods, what is your overall recommendation? Explain fully why you made your recommendation. Include a discussion of the advantages and disadvantages of each method. How you support your recommendation is most important.