Investment Project Scenario Pizza Palace is a pizza restaurant known for its posh décor 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 2 3 4 5 6 7 8 Refurbish Current Ovens $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 Purchase New Ovens $800,000 $600,000 $300,000 $200,000 $100,000 $50,000 $50,000 $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. (

Investment Project Scenario Pizza Palace is a pizza restaurant known for its posh décor 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 2 3 4 5 6 7 8 Refurbish Current Ovens $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 Purchase New Ovens $800,000 $600,000 $300,000 $200,000 $100,000 $50,000 $50,000 $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. (

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Description: Investment Project Scenario Pizza Palace is a pizza restaurant known for its posh décor and its brick - ovenpizza. Pizza Palace has five brick ovens that need attention and is considering two options. Both optionswill cost around $1,000,000 (initial

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2TP: Austins cell phone manufacturer wants to upgrade their product mix to encompass an exciting new...

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