Shruti Shrills is considering an expansion of one of its existing buildings to add more...
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Shruti Shrills is considering an expansion of one of its existing buildings to add more manufacturing space for its kid-friendly noise makers. Several possible scenarios exist for future cash flow, as follows.
1. Construction cost of a $500,000, study sales and cost each year, netting to an annual operating cash inflow of $70,000, the expansion would have no salvage value at the end of its 10 year useful life ( the building would be repurposed for a different product).
2. Construction cost over $500,000 rising and then falling net cash flow each year for 10 years, as follows, $50,000 for the first 2 and the last 2 years, $175000 for the next for the year of 3-5, and $100000 for years 6-8.
3. Construction cost of $ of 700,000, no cash flows in year 1, $75,000 in year 2 and 3, $150,000 in year 4, $100,000 in years 5-8, and $50,000 in the last 2 years.
(a) calculate the simple payback period for all the three scenarios.
Scenario 1.
Scenario 2.
Scenario 3.
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