Investment Project Scenario Pizza Palace is a pizza restaurant known for its posh dcor and its...
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Investment Project Scenario Pizza Palace is a pizza restaurant known for its posh dcor and its brick-oven pizza. Pizza Palace has five brick ovens that need attention and is considering two options. Both options will cost around $1,000,000 (initial investment). Option 1 is to refurbish its current brick-ovens. If refurbished, Pizza Palace expects the ovens to last another 6 years. The average annual income from refurbishing the ovens is $183,333.33. Refurbishing the ovens will have no salvage value. Option 2 is to replace the current ovens. New ovens would last 8 years and have no salvage value. The average annual income from buying a new oven is $143,750. Pizza Palace expects the following net cash inflows from the two options: Year 1 Refurbish Current Ovens Purchase New Ovens $600,000 $800,000 2 $500,000 $600,000 3 $400,000 $300,000 4 $300,000 $200,000 5 $200,000 $100,000 69 $100,000 $50,000 $50,000 8 00 $50,000 Pizza Palace uses straight-line depreciation and requires an annual return of 10% Requirements: 1. Calculations: Please use the provided Excel Template to calculate the payback, the ARR, the NPV, and profitability index for both options. (80 points) Investment Project Scenario Pizza Palace is a pizza restaurant known for its posh dcor and its brick-oven pizza. Pizza Palace has five brick ovens that need attention and is considering two options. Both options will cost around $1,000,000 (initial investment). Option 1 is to refurbish its current brick-ovens. If refurbished, Pizza Palace expects the ovens to last another 6 years. The average annual income from refurbishing the ovens is $183,333.33. Refurbishing the ovens will have no salvage value. Option 2 is to replace the current ovens. New ovens would last 8 years and have no salvage value. The average annual income from buying a new oven is $143,750. Pizza Palace expects the following net cash inflows from the two options: Year 1 Refurbish Current Ovens Purchase New Ovens $600,000 $800,000 2 $500,000 $600,000 3 $400,000 $300,000 4 $300,000 $200,000 5 $200,000 $100,000 69 $100,000 $50,000 $50,000 8 00 $50,000 Pizza Palace uses straight-line depreciation and requires an annual return of 10% Requirements: 1. Calculations: Please use the provided Excel Template to calculate the payback, the ARR, the NPV, and profitability index for both options. (80 points)
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Related Book For
Introduction To Health Care Management
ISBN: 9781284081015
3rd Edition
Authors: Sharon B. Buchbinder, Nancy H. Shanks
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