Reference no: EM131538176

Need help with economic anaylsis. When you have completed the materials cost, and manufacturing cost you will perform an economic analysis of two separate procurement options for funding to begin the process of manufacturing your dog house. The basis for this economic analysis is that you will produce 40 dog houses per month. Use an interest rate of 6% annually, or 0.5% per month, for your comparison. Option 1: You procure 12 months of funding up front (at month 0) at a 15% discount. To do this, you need to take out a loan which will be paid back (at the end of) each month; the lender’s rate is 18% annually, or 1.5% per month (used to determine what your monthly payment will be). Option 2: You can procure funding as needed on a monthly basis (1 month’s supply at a time) starting at month 0 so you have the first month’s materials on hand. Note: You don’t need to buy at the end of month 12 for full price. Draw the cash flow diagrams for each option through five years. Which is the better finance option for the dog house materials from a cost perspective? Why? What is the APR for each option?