The Situation
Your friend has a corner lot and wants to use it in an investment that would yield at least 6%. He has studied many possibilities and has arrived at the following two alternatives.
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Build Gas Station
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Build Ice Cream Stand
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Initial cost
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80,000
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120,000
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Annual property taxes
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3,000
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5,000
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Annual income
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11,000
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16,000
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Life of building (years)
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20
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20
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Salvage Value (value at end of useful life)
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0
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0
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Decision Analysis
What are the decision alternatives? Develop the business model for each alternative. (Recall the input table and the linking of cash flow to input table.)
Perform sensitivity analysis on key outputs in relation to input parameters. Based on your analysis, which alternative would you recommend to your friend?
Note: This is Data Analysis & Decision Making Question