A manufacturer of custom retail displays, had seen its production line slow to a halt when one of the company’s two machines had broken down. Tom, the company’s president, believed he had three viable options: buy a new machine, lease a new machine, or run an extra shift to keep his current machines working for more hours. It requires to use net present value calculations and consider all three options both qualitatively and quantitatively to make recommendations. 1: Purchase a New Machine with Cash This would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. The cost of the new equipment would be $142,000. He also estimated that there would be increased out-of-pocket operating costs of $10,000 per month if a new machine were brought online. After five years, the machine would have a salvage value of $40,000. Although the company did not have the cash readily available to make the purchase, Tom believed that with a small amount of cash budgeting and planning, this option would be feasible. 2: Finance The Purchase of a new Machine The company selling the CNC machine also offered a leasing option. The terms of the lease included a down payment of $50,000 and monthly payments of $2,200 for five years. After five years, the equipment could be purchased for $1. The operating costs and salvage values would be the same as option 1, the purchasing option. The company had the cash on hand to make the down payment for the lease. With both the leasing and purchasing options, the company had sufficient space to operate the new equipment, and Tom believed he had almost all of the right employees in place to execute this plan. 3: Add a Third Shift Tom and one of his co-investors had extensive experience in the trucking industry and had seen firsthand the effect of utilizing equipment around the clock. Tom believed adding a third shift could unlock a lot of value , and it could be done at a low cost. It would involve moving several existing employees to work the night shift and would also mean hiring some new employees. Although Tom believed that in time he may add a full third shift to increase overall capacity, his initial plan was for the night shift to run as a “skeleton crew” with the primary purpose of keeping the CNC machines operational for 24 hours. He believed that adding a third shift would produce the same increase in revenue as adding a new machine to his existing shifts. He estimated that adding a third shift would create $12,000 in additional monthly out-of-pocket operating costs, but no new machinery would need to be purchased. This option would be difficult to execute, as there were major safety and supervision challenges associated with running a night shift.  Questions 1. Without using any numbers, identify the strengths and weaknesses of the three options. Are there any other options to consider? 2. Compute and compare the net present value and payback period of each option. 3. Make a recommendation. 4. Rounding to the nearest 1%, at what discount rate does leasing produce a higher net present value than paying cash?回答并用中文解析