Gce Model Questions Vol1 2022 Geography Question 38

A textile firm is comparing two possible sites for a new factory.\n\nSite A: capital cost \(\$8\) million, labour cost \(\$12\) per unit, transport cost \(\$0.8\) per km per unit, distance to market 120 km, expected annual production 200,000 units.\n\nSite B: capital cost \(\$6\) million, labour cost \(\$15\) per unit, transport cost \(\$0.6\) per km per unit, distance to market 150 km, expected annual production 250,000 units.\n\nThe firm uses a discount rate of 8% and a planning horizon of 10 years, with straight‑line depreciation of capital (no salvage). Using the rational cost model \(\text{Annual Cost}=\frac{\text{Capital}}{10}+\text{Production}\times(\text{Labour}+\text{Transport}\times\text{Distance})\), calculate the Net Present Value (NPV) of total annual cost for each site and state which site is cheaper.