Simion Inc Is Considering to Build a New Office in Clagary

question 39

Multiple Choice

Simion Inc is considering to build a new office in Clagary, which requires an immediate investment of $78 million and another $35 million in one year. Being near to the customers, it is expected a revenue of $2 million in Year one, $10 million in year 2 and then a steady stream of $15 million revenue each year in the subsequent 12 years. However, if they simply expand their current offices in Toronto and build a satellite office in Calgary, it requires an immediate investment of $30 million, another $15 million after one year, and $10 million after two years. Net returns are $expected to be $10 million per year from year 2 to year 14. Determine the net present value at 7.4%. Which option is preferable according to the net present value criterion?

• A) Build a new office with NPV of $21 million
• B) Expand current office with NPV of $9 million
• C) Build a new office with NPV of -$21 million
• D) Expanding current office is $30 million better in NPV compared to building a new office
• E) Either B or D

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Definitions:

Umwelt

A term in biosemiotics and psychology, referring to the self-centered, subjective world that each organism inhabits and perceives.

Flow

A psychological state of being completely immersed and engaged in an activity, often leading to enhanced performance and creativity.

Mindfulness

The practice of being fully present and engaged in the moment, aware of one's thoughts and feelings without judgment.

Awe

A feeling of reverential respect mixed with fear or wonder, often inspired by encountering something grand, sublime, or extraordinary.