Using the information above and in Figure 1, recommend either Option 1 or Option 2 for MSS. You will find it useful to calculate the payback period for the two options.

Discussion could include:

Option 1: IT centre

• Longer term option
• Higher risk
• Some funding has already been achieved
• It fits in with Jacob’s vision and mission
• It helps with a very valuable USP
• It could attract pupils from the city
• There is a higher risk of failure although loss is smaller, there are possible construction problems
• “Successful” returns are higher
• But large capital outlay
• Predicted outcome $1300
• Staff don’t like this option, but benefits for students
• ARR 26.7 %, NPV $1153, payback 2.14 years which is just less than 2 years and 2 months.
• Donor already found for internet connection

Option 2: minibus

• Solves an urgent problem
• Lower risk
• There is less likelihood of it attracting new students?
• The risk of failure is small and the probability of success higher.
• Predicted outcome $1165, less than the IT centre
• Staff like the idea
• It has a variety of uses
• Quicker payback (1.45 years, just more than 1 year and 5 months) and higher ARR (35.4 %) but shorter life, hence NPV lower ($567)
• Improves situation for teachers and students
• Purchase cost relatively low.

Other issues

• Reliability of data?
• How realistic are probabilities?
• Are there other alternatives?

Only some of these issues need to be discussed for a full response
Accept any other relevant discussion.

Criterion A is concerned with what techniques and ideas are chosen to solve the problem.

Criterion B is concerned with how effectively these techniques and the data are applied to the problem.

Criterion C is concerned with how well arguments are balanced and recommendations that are made.

Criterion A: Knowledge areas include: risk, decision trees and predicted outcomes, investment appraisal, use and limitations of data, strategic decision making. No understanding of decision trees and/or predicted outcomes and/or investment appraisal, marks limited to [3].

Criterion B: Application will be judged by the use of the stimulus material, in particular the extra material. If only one option considered, award a maximum of [2]. If both options considered but no use of additional material, award a maximum of [3]. If no payback based on the original data or payback not used limit to [3].

Criterion C: Reasoned argument. For full marks there needs to be a comparison between the two options and a supported recommendation. If analysis of only one, award a maximum of [3]. If no comparison but analysis of both options award a maximum of [2]. For simplistic analysis max [1].

Criterion D: Structure – see criterion.

Criterion E: Likely issues include: Groups: impact on communities, teachers and/or other employees, students/potential students, parents, townspeople, contractors, trustees, management, other stakeholders. Individuals: Jacob and Mrs K.

0 = no relevant mention of any groups, individuals
1 = only group(s), or only individual(s) or both treated superficially
2 = group(s) and individuals(s) considered but either groups or individuals superficial
3 = groups and individuals considered more than superficially but not balanced
4 = groups and individuals given balanced consideration

Note: a recommendation that a decision cannot be made due to lack of information (eg market research) can be regarded as a decision provided the arguments are supported.

Do not penalise candidates who make little or no reference to the original pre-release material.