Prepare a report intended for the board of directors of Watertown that contains an evaluation of the two production processes and a recommended course of action. Your report should contain answers to the following questions.
1. Compute Net Present Value, Internal Rate of Return (IRR), Profitability Index, Payback Period, and Discounted Payback Period for each of the two processes.
2. Explain why the payback period is not an appropriate decision rule. Should you use discounted payback instead? Explain why or why not.
3. Why is the IRR measure potentially misleading? Explain the concept of Modified IRR. Is it helpful in making a decision in this situation? Explain why or why not.
4. Explain the concept of profitability index. Is it helpful in making a decision in this situation? Explain why or why not.
5. Provide an explanation that convinces the skeptics on the board that NPV method is the best decision rule to use.
Structure and Content of Report: Your written report should adhere to the following format:
1. Introduction
2. Analysis
3. Conclusion
4. Appendix
The introduction sets the stage for the work to follow and should consist of one paragraph describing the key issue(s) that your analysis addresses.
The text of your analysis will constitute the bulk of the written presentation. Here you will explain the process you took to develop responses to the questions above and report the results. Write in clear, concise, and complete sentences, and avoid the use of bullet points or numbered lists. Do not repeat the questions above in the text of your report; instead, combine questions in paragraphs as appropriate and begin each paragraph with a relevant transition statement. Include in appendices all supplementary figures, tables, and any other data necessary to support the analysis. Be sure to reference information in appendices in the text of your report.
The conclusion should be one paragraph that summarizes the key results of the analysis and your recommendation, where appropriate.
Format of Report: The text of your report should not exceed four pages of Times New Roman 11-point font, double-spaced text, with 1 inch margins at the sides, top, and bottom of the page. The page limit does not include appendices, which should be at the end of your written analysis.

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