Question
Ana has a Day-care service that operate Mondays through Fridays (240 working days in a year) and charges $28 per child (day service). The service
Ana has a Day-care service that operate Mondays through Fridays (240 working days in a year) and charges $28 per child (day service). The service includes providing the child snacks (food and other miscellaneous) with an average cost of $4.00 (per child/day). It will have two employees (annual Salary cost for each of $20,000). Each employee can manage up to 10 children (for the 2 employees the maximum capacity per day is 20 children). Monthly rent cost is $1,500. The costs each month for utilities and other fixed costs are $500. Ana also has to pay $2,000 for insurance once a year.
NPV(i=.12): New Strategy that is being considered- Spend annually $1,200 in advertising (flyers) and hire an additional employee (additional salary of $20,000 annually). Under this strategy it is expected to have 27 children per day (240 working days in a year). How much is the Strategy Net Present Value?
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