Effects of Economic Policies on Technological Enterprises

Effects of Economic Policies on Technological Enterprises
Name
Course
Institution
Date of Submission
Effects of Economic Policies on Technological Enterprises
The costs and benefits of each option as follows:
Option AOption BYearCost in year ($)Benefit in year ($)Cost in year ($)Benefit in year ($)05,000,00001,600,000500,0001220,000700,000450,000560,0002225,000800,000460,000580,0003240,000850,000480,000610,0004246,000900,000500,000650,0005250,0001,000,000520,000700,0006255,0001,200,000540,000750,0007260,0001,400,000550,000800,0008265,0001,450,000570,000900,0009270,0001,300,000580,000880,00010275,0001,100,000600,000860,000
In the Excel, the following discounting rates and Present value factors were used;
Year10%8%6%Disc. Rate PV FactorDisc. Rate PV FactorDisc. Rate PV Factor01.00001.00001.00001.00001.00001.000011.10000.90911.08000.92591.06000.943421.21000.82641.16640.85731.12360.890031.33100.75131.25970.79381.19100.839641.46410.68301.36050.73501.26250.792151.61050.62091.46930.68061.33820.747361.77160.56451.58690.63021.41850.705071.94870.51321.71380.58351.50360.665182.14360.46651.85090.54031.59380.627492.35790.42411.99900.50021.68940.5919102.59370.38552.15890.46321.79080.5584NB: The Discounting Rates are obtained from the following formula


And the Present Value Factor was obtained using the formula:


For instance, in Year 3 at 8%;


= 1.2597
And Present Value Factor;


= 0.7938
This procedure is repeated for all the years and discount rates provided that is 10%, 8% and 6% as illustrated in the formulas provided within the excel work sheet.
Option A: Initial Investment is $ 5,000,000: Discount Rate = 8.0%
YearCost p.a. ($)Benefit p.a. ($)Net Benefit p.a. ($)NPV= B/(1+r)n05,000,0000-5,000,000-5,000,0001220,000700,000480,000444,4322225,000800,000575,000492,947.53240,000850,000610,000484,2184246,000900,000654,000480,6905250,0001,000,000750,000510,4506255,0001,200,000945,000595,5397260,0001,400,0001,140,000665,1908265,0001,450,0001,185,000640,255.59270,0001,300,0001,030,000515,20610275,0001,100,000825,000382,140TOTAL3,194,000211,068
Option B: Initial Capital Investment = $ 1,600,000; Discounting Rate = 8.0%
YearCost p.a. ($)Benefit p.a. ($)Net Benefit p.a. ($)NPV= B/(1+r)n01,600,000500,000-1,100,000-1,100,0001450,000560,000110,000101,8492460,000580,000120,000102,8763480,000610,000130,000103,1944500,000650,000150,000110,2505520,000700,000180,000122,5086540,000750,000210,000132,3427550,000800,000800,000466,8008570,000900,000330,000178,2999580,000880,000300,000150,06010600,000860,000860,000398,352TOTAL2,090,000766,530
; Option B is Preferred
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