1. You are considering employing manufacturing workers in Japan in 1987. Directly analogous workers for an activity expected to take the same number of hours of work cost $750,000 in USA in 1982. How much should you expect to pay for the labour?
2. A project is estimated in the face of an interest rate of 10%. Find the present equivalent amount for each possible outcome.
What would you investigate to determine whether you should proceed with the project?
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Optimistic
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Most likely
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Pessimistic
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Investment
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$50,000
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$58,000
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$65,000
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Service life
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8 years
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6 years
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4 years
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Salvage value
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$20,000
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$16,000
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$10,000
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Net annual return
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$22,000
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$14,000
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$10,000
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3. The best estimates for an investment are as below. For a range of interest rates from 5% to 25% would your advice concerning whether to proceed with the project change? Why?
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Initial investment
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$180,000
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Estimated life
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10 years
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Salvage value
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$12,000
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Net annual return
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$45,000
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