Independent World Expansion Plan
Independent World Ltd has 3 options for business expansion.
The first option is to acquire Great Wall Co. at a price of USD 10,000. For the first time, Independent World projects a cash in of USD 1300 for 20 years. However, they also still have to invest USD 50 per year for 20 years.
For the second option, Independent World can launch Warzone Game products for a fee of R&D USD 500 and continued development costs in 1-3 years USD 500 each year. Furthermore, until the 20th year, Independent World must carry out promotional fees amounting to USD 200 per year. The cash in estimates are:
- USD 230 in the first year
- USD 300 in the second year
- USD 350 in the third year
- USD 450 from the 4th to the 8th years
- USD 500 until the 20th year.
For the third option, Independent World can launch the StarsGamez product which requires a bigger investment but more cash in. As for the financial projections, it is like this:
- Initial R&D fee: USD 750
- Development Costs for 1-10 years: USD 450; next development costs until the 20th year will be reduced to USD 350.
For cash in, in 1-5 years it has reached USD 300 per year. The 5-10th year is USD 500 per year. Years 11-13 cash in is USD 750 per year and then that would be estimated jumped to USD 1000 in years 14 and 15 respectively; USD 1250 each in years 16, 17, and 18. Cash in USD 200 will be achieved in year 19 and USD 2000 in the 20th year.
If the interest rate for investment held by Independent World is 10%, from these three choices, which one do you suggest to do.
a. Making calculations for the analysis
b. Provide an analysis based on an analysis of why you chose a particular choice
c. If the interest rate for investment changes to 12%, which choice will you take and explain