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?.
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 3 steps with 4 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)