The owner of a furniture factory wishes to install a new production plant, for which he has three location alternatives that are detailed below: Alternative 1: A piece of land located in San Lucas, with a value of Q.1,100,000.00. The construction will have a value of Q.1,055,000.00. The necessary machinery is as follows: Q. 2 disc cutters at Q.50,000.00 each; 1 Router to Q. 40,000.00; 1 Top to Q. 35,000.00; 1 automatic multiple saw at Q.30,000.00. It will also have an expense of Q.30,000.00 for a topographic study, Q.15,000.00 for renting a bulldozer; payroll payment for Q.250,000.00 per month; electric power expense for Q.650.00 per month; drinking water for Q.675.00/month; telephone for Q.800.00/month; tool and equipment Q.50,000.00. Annual sales will be Q.12,450,000.00. Alternative 2: A building and land valued at Q.1,900,000.00, located in zone 7. It has used machinery at a cost of Q.150,600.00; tools and equipment for Q.20,700.00. Electricity payment for Q.695.00/month; drinking water Q.600.00/month; telephone: Q.900.00/month; payroll payment for Q.340,000.00 per month. Annual sales estimated at Q.12,600,000.00. Both alternatives must be evaluated at a discount rate of 25.5%, over a period of 5 years. What alternative do you recommend to the factory owner? Why?.
The owner of a furniture factory wishes to install a new production plant, for which he has three location alternatives that are detailed below:
Alternative 1:
A piece of land located in San Lucas, with a value of Q.1,100,000.00. The construction will have a value of Q.1,055,000.00. The necessary machinery is as follows: Q. 2 disc cutters at Q.50,000.00 each; 1 Router to Q. 40,000.00; 1 Top to Q. 35,000.00; 1 automatic multiple saw at Q.30,000.00. It will also have an expense of Q.30,000.00 for a topographic study, Q.15,000.00 for renting a bulldozer; payroll payment for Q.250,000.00 per month; electric power expense for Q.650.00 per month; drinking water for Q.675.00/month; telephone for Q.800.00/month; tool and equipment Q.50,000.00. Annual sales will be Q.12,450,000.00.
Alternative 2:
A building and land valued at Q.1,900,000.00, located in zone 7. It has used machinery at a cost of Q.150,600.00; tools and equipment for Q.20,700.00. Electricity payment for Q.695.00/month; drinking water Q.600.00/month; telephone: Q.900.00/month; payroll payment for Q.340,000.00 per month. Annual sales estimated at Q.12,600,000.00.
Both alternatives must be evaluated at a discount rate of 25.5%, over a period of 5 years. What alternative do you recommend to the factory owner? Why?.
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