Before Mike had a chance to move his business, the junk food tax was repealed and he has decided to stick with his current location and keep his cart. He has also decided to add a menu item. He can either add hot pretzels or slurpees. When assessing his two investment options, Mike would like to make a minimum return of 10% on his investment.

Pretzels

Mike can buy a pretzel warmer for $25,000. He would sell pretzels for $4/each and can purchase them for $35 for a box of 50 pretzels. He will need a propane tank for the pretzel warmer and estimates he will spend $550/month on fuel. Mike estimates he will sell 30 pretzels each day. Mike estimates he can use the pretzel machine to generate income for five years, after which time it will have a zero value.

Slurpees

Mike can buy a slurpee machine for $35,000. He estimates he can sell 75 slurpees per day for $2/each. His variable costs for slurpees is $0.50 per slurpee for syrup and ice. His fuel costs for operating the slurpee machine should be about $750/month. Mike estimates he can use the slurpee machine to generate income for eight years, after which time it will have zero value.

Question 1 10 pts Calculate the Payback Period in months for each of the two investments. Do not use the dollar sign ($). Round your answers to two decimal places. Payback Period Pretzel Warmer Value Slurpee Machine Value Cost of Investment Cost of Investment Payback Period in Payback Period in Months Months Question 2 10 pts Calculate the Payback Period in months for each of the two investments. Do not use the dollar sign ($). Round your answers to the nearest whole dollar. Net Present Value (NPV) Pretzel Warmer Slurpee Machine Cost of Investment Cost of Investment Estimated useful life in Estimated useful life in years (enter the years (enter the number only) number only) Hurdle rate (do not Hurdle rate (do not include the % sign) include the % sign) Annual Cash Flow Annual Cash Flow Present Value of Future Present Value of Future Cash Flows Cash Flows N PV of the investment NPV of the investment opportunity opportunity Question 3 3 pts Based on your analysis, which investment opportunity has the fastest payback? [Select] V Which investment has the highest Net Present Value (NPV)? [Select] V Which investment opportunity would you recommend and why? [Select] V