Contracted to develop-launch one of two different satellites

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Reference no: EM131856276

Calisto Launch Services is an independent space corporation and has been contracted to develop and launch one of two different satellites. Initial equipment will cost $790 thousand for the first satellite and $840 thousand for the second. Development will take 5 years at an expected cost of $130 thousand per year for the first satellite; $140 thousand per year for the second. The same launch vehicle can be used for either satellite and will cost $225 thousand at the time of the launch 5 years from now. At the conclusion of the launch, the contracting company will pay Calisto $2.5 million for either satellite.

Calisto is also considering whether they should launch both satellites. Because Calisto would have to upgrade its facilities to handle two concurrent projects, the initial costs would rise by $120 thousand in addition to the first costs of each satellite. Calisto would need to hire additional engineers and workers, raising the yearly costs to a total of $360 thousand. An additional compartment would be added to the launch vehicle at an additional cost of $85 thousand. As an incentive to do both, the contracting company will pay for both launches plus a bonus of $0.85 million. Using a future worth analysis (FW) with a MARRof 5.00 percent/year, what should Calisto Launch Services do?

What is the future worth of the first satellite?

What is the future worth of the second satellite?

What is the future worth of both satellites?

Reference no: EM131856276

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