Capital budgeting methods, sensitivity analysis, spreadsheet development,
uncertainties Your brother, Jackson, was laid off from his job with a large and
famous software company. He would like to sell his stock in the company and use the
proceeds to start a restaurant. The stock is currently valued at $500,000. He received
a job offer from a competitor that will pay $90,000 per year plus benefits. He asked
you to help him decide the best course of action.
REQUIRED:
• A. What are the alternatives that Jackson faces?
• B. Choose the most appropriate analysis technique and explain your choice.
• C. If your brother chooses to open a restaurant, what are his opportunity
costs?
• D. List the steps you would take to develop a spreadsheet that your brother
could manipulate to help with the quantitative aspects of this decision. Assume
that you only have time to set up a template and that your brother will fill in
the specific information. However, you need to tell him the general categories
of information he will need to gather.
• E. List uncertainties about whether taking the job offer would turn out well
for your brother. List as many uncertainties as you can.
• F. List uncertainties about whether opening a restaurant would turn out
well for your brother. List as many uncertainties as you can.
• G. Explain why it is possible for your brother to make a good decision even
though he cannot know for sure how well his alternatives would work out.
