You are the operator of a plant and would like to improve the throughput. You de

Question

You are the operator of a plant and would like to improve the throughput. You develop two different options for management and partner approval. Option 1: The capital investment is estimated at 2,500 k$. Option 2: The capital investment is 10,000 k$. Analyze the base case and the two options and make a recommendation to your boss Calculate the NPV Option 1 at 10% You are the operator of a plant and would like to improve the throughput. You develop two different options for management and partner approval. Option 1: The capital investment is estimated at 2,500 k$. Option 2: The capital investment is 10,000 k$. Analyze the base case and the two options and make a recommendation to your boss Calculate the NPV of the Option 2 at 10%

Explanation / Answer

NPV 1 $531.56

NPV 2 $694.97

Year Option 1 Option 2 0 -2500 -10000 1 1500 3500 2 1200 5000 3 900 4500 Interest rate Discounting Value NPV Option 1 Discounting Value NPV Option 2 Option 2-Option 1 10% $3,031.56 $531.56 $10,694.97 $694.97 $163.41 20% $2,604.17 $104.17 $8,993.06 ($1,006.94) ($1,111.11) 30% $2,273.55 ($226.45) $7,699.14 ($2,300.86) ($2,074.42) IRR 1 IRR 2 22.89% 13.74%

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