Question
The Canadian Government is considering building apartment units for its employees working in a foreign country. These employees are currently living in rental houses owned
The Canadian Government is considering building apartment units for its employees working in a foreign country. These employees are currently living in rental houses owned by local landlords. Currently, the government reimburses the employees their housing and transportation expenses. Two mutually exclusive locations for building the apartments, are shown in the following data:
| LOCATION A | LOCATION B | |
| Original Investment by the Government | $8,000,000 | $10,000,000 |
| Estimated Annual Maintenance Expenses | $360,000 | $350,000 |
| Government Savings in annual Reimbursements | $1,960,000 | $2,100,000 |
Assume the salvage value of the apartments to be 60% of the first investment, at the end of the 10th year. MARR is 10% and a 10-year study period is considered. DO nothing is not an alternative.
INSTRUCTIONS
- Use Excel to compute the IRR for each alternative location. (10 marks)
- Compute the IRR on the incremental investment, and make a recommendation regarding which location to select. (10 marks)
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Management Audit Approach In Writing Business History A Comparison With Kennedys Technique On Railroad History
Authors: Allen Bures
1st Edition
1138980277, 978-1138980273
