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Business, 28.02.2021 16:30 mayaleila

Sammy's Ski Lodge has enough financial capital to undertake any or all of the following projects: I. Buying a lift machine that will last 3 years and produce $3000 worth of services the first year, $2000 the second year, and $1000 the third year.
II. Developing and building a robot lift operator that will last 5 years and produce $5000 worth of services each year.
III. Building a new restaurant that will last 5 years and produce $30,000 worth of food and drink sales each year.

Required:
a. If Sammy's only alternative to the above projects is putting his money in the bank and earning 5% interest, what is the present discounted value of each project's revenue stream?
b. The PDV of project (I.)'s revenue stream is:
c. The PDV of project (II.)'s revenue stream is:
d. The PDV of project (III.)'s revenue stream is:
e. Project (I) costs $5,800; project (II) costs $20,000; and project (III) costs $100,000. What is the NPV (Net Present Value = PDV of revenues minus PDV of costs) of each project? Which project(s) will Sammy choose to undertake? Why?

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