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Transcription of this question: 4.While identifying a location for the new factory, Zylstra Industries (Zl), a large manufacturingcompany located not far from Location A, presented RDM with another possibility: a strategicalliance. Thus, RDM have two options to consider.Option 1: Purchase land and build a new automated factory. The potential location issummarized in Table 1.Table 1: Information on Location ACost of land, construction,and $6 000 000 in equipmentSkills of workforceAccess to large marketsExpected 5-year profitARRPaybackLocation A$64 000000LowCentrally located nearhighly profitable markets$80 000000 ($16000000per year for 5 years)xAnnual payments to mortgage$2.6 millionlender if financed with debtLocation A is in an economically depressed area of northwestern Europe, where land valuesnevertheless remain high. Location A has an old industrial tradition with a long tradition ofpoor industrial/employee relations.Option 2: A ten-year strategic alliance with Zl. Zl has proposed that RDM uses some of its vacantmanufacturing space in exchange for assistance in transforming Zls manufacturing process into ahighly automated one using robots. Twenty RDM engineers and computer scientists would:• transform Zls current factory into an automated one• train Z/ engineers• monitor the factory for the duration of the strategic alliance.Zl would pay all capital expenditures and RDM would employ the twenty engineers andcomputer scientists. Average salary and other financial rewards of one highly skilledemployee would be $150000 per year. In exchange, RDMwould get free usage of factoryfloor space. RDM would buy its own equipment at a cost of $6000000.RDM estimates that leasing space similar to what Zl is offering would cost $3000 000 a year.(a)(b)(c)(d)State two reasons for selecting a specific location for production.Using the information in Table 1, calculate for Location A:(i) the payback period (show all your working);(ii) the average rate of return (ARR) (show all your working).Explain two types of financial rewards, other than salary, that RDM might offer itsengineers and computer scientists.Recommend whether RDM should choose Option 1 or Option 2.[2][2][2][10]

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