Your organization is considering an investment of $$5,000,000$ for an improved manufacturing process. It is assumed that it will reduce operating costs of $$2,500,000$ for each of the next $3$ years. Assuming a $15\%$ required ROI, should the organization make the investment?

Considering Problem $1$ above, what is the required yearly reduction in operating costs to break even at the $15\%$ required ROI $($plus$/$minus $0\mathrm{.}1\%)?($You can solve this iteratively with Excel.$)$

I believe it is foolhardy to assume these $3-$year reductions in operating costs are accurate. Let$$s assume that Year One has a mean of $$2,500,000$ with a standard deviation of $$250,000($assume normally distributed$).$ Assume Year Two has again a mean $$2,500,000$ with a standard deviation of $$500,000.$ Finally, Year Three has again a mean of $$2,500,000$ but with a standard deviation of $$750,000.$ As you can see, we are assuming the estimates are less accurate later over time. What are the projected NPWt at the $25$th$,50$th$,$ and $75$thpercentiles? Provide a $1,000$ iteration Monte Carlo simulation model. Assume a $15\%$ required ROI. Solve in Excel.