Darren Mack owns the "Gas n' Go" convenience store and gas station. After hearing a marketing lecture, he realizesthat it might be possible to draw more customers to his high-margin convenience store by selling his gasoline at alower price. However, the "Gas n' Go' is unable to qualify for volume discounts on its gasoline purchases, andtherefore cannot sell gasoline for profit if the price is lowered.Each new pump will cost $110,000 to install, but will increase customer traffic in the store by 11,000 customers peryear. Also, because the "Gas n' Go" would be selling its gasoline at no profit, Darren plans on increasing the profitmargin on convenience store items incrementally over the next five years. Assume a discount rate of 7 percent. Theprojected convenience store sales per customer and the projected profit margin for the next five years are given inthe table below.iYear12345Projected Convenience StoreSales Per Customer$4$5.50$8$10$12Projected ProfitMargin20%25%30%35%40%5a. What is the NPV of the next five years of cash flows if Darren had five new pumps installed?NPV=S (Enter your response rounded to two decimal places.)

Answered: Darren Mack owns the "Gas n' Go"…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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