Answer Happy

Report Minimum of 150 words Clearly explains the merit and benefits of each of the two sites Includes reasons substantiating the benefits of each Includes terminology that aligns with capital investment analysis and present values concept.
Report Minimum of 150 words Clearly explains the merit and benefits of each of the two sites Includes reasons substantiating the benefits of each Includes terminology that aligns with capital investment analysis and present values concept.
PR 12-5B Alternative capital investments Obj. 3, 4 The investment committee of Auntie M's Restaurants Inc. is evaluating two restaurant sites. The sites have different useful lives, but each requires an investment of $900,000. The estimated net cash flows from each site are as follows: Net Cash Flows Year Wichita Topeka 1 $310,000 $400,000 2 310,000 400,000 3 310,000 400,000 4 310,000 400,000 5 310,000 310,000 6 The committee has selected a rate of 20% for purposes of net present value analysis. It also estimates that the residual value at the end of each restaurant's useful life is $0, but at the end of the fourth year, Wichita's residual value would be $500,000. Instructions 1. For each site, compute the net present value. Use the present value of an annuity table appearing in Exhibit 5 of this chapter. Ignore the unequal lives of the projects. 2. For each site, compute the net present value, assuming that Wichita is adjusted to a four-year life for purposes of analysis. Use the present value table appearing in Exhibit 2 of this chapter. 3. Prepare a report to the investment Committee, providing your advice on the relative merits of the two sites.