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What is the payback period for each option? What is the Net Present Value of each option?

What is the payback period for each option? What is the Net Present Value of each option?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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14. Calvin Wu owns a Chinese food restaurant in Taylor, MI, and is trying to decide between expanding his current location and purchasing another, existing restaurant nearby. The predicted costs and benefits of each acquisition are reproduced below (Calvin's discount rate is 12%): Up-front Costs $ $ Working Capital Required Yearly Depreciation $ Acquisition Value at End of 8 years $ Annual Net Cash Inflows $ What is the payback period for each option? Expansion What is the Net Present Value of each option? 160,000 $ 5,000 $ 20,000 $ 200,000 $ 50,000 $ Purchase 240,000 20,000 30,000 250,000 75,000
Transcribed Image Text:14. Calvin Wu owns a Chinese food restaurant in Taylor, MI, and is trying to decide between expanding his current location and purchasing another, existing restaurant nearby. The predicted costs and benefits of each acquisition are reproduced below (Calvin's discount rate is 12%): Up-front Costs $ $ Working Capital Required Yearly Depreciation $ Acquisition Value at End of 8 years $ Annual Net Cash Inflows $ What is the payback period for each option? Expansion What is the Net Present Value of each option? 160,000 $ 5,000 $ 20,000 $ 200,000 $ 50,000 $ Purchase 240,000 20,000 30,000 250,000 75,000
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