Question 6

Projected Cashflows for the Project

Year Pessimistic Most Likely Optimistic
1 $ 14,000.00 $ 20,000.00 $ 22,000.00
2 $ 19,000.00 $ 25,000.00 $ 30,000.00
3 $ 27,000.00 $ 30,000.00 $ 36,000.00
4 $ 32,000.00 $ 35,000.00 $ 39,000.00

Discounted Cashflows at 20% Hurdle Rate

Year Most Likely - Discounted Cashflow

1 $ 16,666.67
2 $ 17,361.11
3 $ 17,361.11
4 $ 16,878.86
Total $ 68,267.75

(Discounted Cashflow= Cashflow/Hurdle Rate)

Profitibility Index = Sum of Discounted Cashflows/ Intial Investment
Intial Investment = $65000

Profitibility Index = 1.05

The Profitibility Index is greater than 1, the project should be accepted.

Question 9
Method
Category
Weight A B C
Consulting Cost 20 1 2 3
Acquisition Time 20 2 3 1
Disruption 10 2 1 3
Culture Differences 10 3 3 2
Skill Redundancies 10 2 1 1
Implementation risks 25 1 2 3
Infrastructure 10 2 2 2
Total 105

Method

Category
 Percentage
Category Contribution to
Weight (W) value [PC]
(W/105)
Consulting Cost 20 19%
Acquisition Time 20 19%
Disruption 10 10%
Culture Differences 10 10%
Skill Redundancies 10 10%
Implementation risks 25 24%
Infrastructure 10 10%
Total 105
Percentage
Contribution Contribution Per Method
Category to value [PC] A*PC B*PC C*PC
(W/105)
Consulting Cost 19% 0.190 0.381 0.571
Acquisition Time 19% 0.381 0.571 0.190
Disruption 10% 0.190 0.095 0.286
Culture Differences 10% 0.286 0.286 0.190
Skill Redundancies 10% 0.190 0.095 0.095
Implementation risks 24% 0.238 0.476 0.714
Infrastructure 10% 0.190 0.190 0.190
Total 1.67 2.10 2.24

We will choose Model C

Question 10
Part a
Method
Category
Weight A B C
Consulting Cost 20 1 2 3
Acquisition Time 20 2 3 1
Disruption 10 2 1 3
Culture Differences 25 3 3 2
Skill Redundancies 10 2 1 1
Implementation risks 10
1 2 3
Infrastructure 10
2 2 2
Total 105

Method

Category
 Percentage
Category Contribution
Weight (W) to value [PC]
(W/105)
Consulting Cost 20 19%
Acquisition Time 20 19%
Disruption 10 10%
Culture Differences 25 24%
Skill Redundancies 10 10%
Implementation risks 10 10%
Infrastructure 10 10%
Total 105

Percentage
Contribution Contribution Per Method
Category to value [PC] A*PC B*PC C*PC
(W/105)
Consulting Cost 19% 0.190 0.381 0.571
Acquisition Time 19% 0.381 0.571 0.190
Disruption 10% 0.190 0.095 0.286
Culture Differences 24% 0.714 0.714 0.476
Skill Redundancies 10% 0.190 0.095 0.095
Implementation risks 10% 0.095 0.190 0.286
Infrastructure 10% 0.190 0.190 0.190
Total 1.95 2.24 2.10

In this case we will choose the Method B

Part b
Method
Category
Weight A B C
Consulting Cost 20 1 2 3
Acquisition Time 20 2 3 1
Disruption 10 2 1 3
Culture Differences 10 3 3 2
Skill Redundancies 10 2 1 1
Implementation risks 25 3 2 3
Infrastructure 10 2 2 2
Total 105

Method
Percentage
Category Contribution to
Weight (W) value [PC]
(W/105)
Consulting Cost 20 19%
 Acquisition Time 20 19%
Disruption 10 10%
Culture Differences 10 10%
Skill Redundancies 10 10%
Implementation risks 25 24%
Infrastructure 10 10%
Total 105
Percentage
Contribution Contribution Per Method
Category to value [PC] A*PC B*PC C*PC
(W/105)
Consulting Cost 19% 0.190 0.381 0.571
Acquisition Time 19% 0.381 0.571 0.190
Disruption 10% 0.190 0.095 0.286
Culture Differences 10% 0.286 0.286 0.190
Skill Redundancies 10% 0.190 0.095 0.095
Implementation risks 24% 0.714 0.476 0.714
Infrastructure 10% 0.190 0.190 0.190
Total 2.14 2.10 2.24

In this case we choose C

(C)
Method
Category
Weight A B C
Consulting Cost 20 1 2 3
Acquisition Time 20 2 3 1
Disruption 10 2 1 3
Culture Differences 10 3 3 2
Skill Redundancies 10 2 1 1
Implementation risks 25 1 2 3
Infrastructure 10 2 2 2
Tax Consideration 15 3 2 1
Total 120

Method
Percentage
Category Contribution
Weight (W) to value [PC]
(W/105)
Consulting Cost 20 17%
Acquisition Time 20 17%
Disruption 10 8%
Culture Differences 10 8%
Skill Redundancies 10 8%
Implementation risks 25 21%
Infrastructure 10 8%
Tax Consideration 15 13%
Total 120
Percentage
Contribution Contribution Per Method
Category to value [PC] A*PC B*PC C*PC
(W/105)
Consulting Cost 17% 0.167 0.333 0.500
Acquisition Time 17% 0.333 0.500 0.167
Disruption 8% 0.167 0.083 0.250
Culture Differences 8% 0.250 0.250 0.167
Skill Redundancies 8% 0.167 0.083 0.083
Implementation risks 21% 0.208 0.417 0.625
Infrastructure 8% 0.167 0.167 0.167
Tax Consideration 13% 0.375 0.250 0.125
Total 1.46 1.83 1.96

Again we will choose C

Question 11
Location
Category 1 2 3 4
Class of Clientele 2 3 1 3
Rent 3 2 1 3
Indoor Mall 3 1 3 1
Traffic Volume 3 2 3 1

As mentioned in the question:

1. The class of Clientele is the most important
2. Rent is 90% as important as the class of Clientele
3. Indoor Mall is 95% as important as Rent
4. Traffic Volume is 80% as important as rent.

Let the class of Cliente (C) have a weightage of 100

Thus Rent will have a weightage of 90% of 100 which equals 90
Indoor Mall will have a weightage of 85.5% (95% of 90)
Traffic Volume will have a weightage of 72 (80% of 90)

The relative weights of each Category are summarized in the table below:

Percentage
Contribution
Category Weightage to Value
Class of Clientele 100 29%
Rent 90 26%
Indoor Mall 85.5 25%
Traffic Volume 72 21%
Total 347.5
 Percentage
Contribution Weightage Per Location
Category to Value (PC) 1 *PC 2 *PC 3*PC 4*PC
Class of Clientele 29% 0.58 0.86 0.29 0.86
Rent 26% 0.78 0.52 0.26 0.78
Indoor Mall 25% 0.74 0.25 0.74 0.25
Traffic Volume 21% 0.62 0.41 0.62 0.21
Total 2.71 2.04 1.91 2.09
Nina should choose option 1 as that best matches her criteria.