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Problem: The average annual rate of return for your start up company for the past years has been 20% and has made you rich. To maintain this growth, you are evaluating two projects: the first to expand the production capacity and the second is open a new office. You have developed the following table:
Year Expansion New office
(initial outlay) 3,500,000 500,000
1 1,500,000 250,000
2 2,000,000 350,000
3 2,500,000 375,000
4 2,750,000 425,000
Answer the following questions:
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