Jim Foster is the owner of Selwyn Pub in North Carolina. Jim's family was the owner of
Question:
Questions
1.) Using your knowledge of marginal analysis and evaluation of extant decisions (potential investment), evaluate the alternative presented above, and recommend to Foster the best rational decision. Hint: Use excel function =NPV to calculate the PV of future cash flows over the 12 months. Use the annual cost of bank funds, adjusted to a monthly rate, as the discount rate.
2.) Use your analysis to justify the bank loan application for the recommended alternative.
3.) What risks would Foster and the bank consider in evaluating the investment?
4.) What cognitive biases should Foster be on the lookout for during the decision-making process? Explain your reasoning.
5. What is the Economic profit per month of alternative A?
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson