Brownie, LLC (Brownie) purchased property (land and a building) three years ago for $1.5 Million. Annual property tax is $25,000 and will not change in the foreseeable future. The property is currently rented for a net after-tax cash flow (inclusive of the aforesaid annual property tax) of $150,000 per year. Brownie is considering converting the property to a fitness center, and has estimated, the net aftertax cash flow of the fitness center will be $250,000 for the next five years. If Brownie converts the property to a fitness center it will no longer receive the aforesaid $150,000 cash flow from the rental of the property. To convert the property to a fitness center will require an initial capital investment of $250,000.00 at the beginning of year one, and an additional investment of $141,986.50 at the end of year two. Brownies required rate or return (or cost of capital) is 10%. Assume all cash flows, except for the initial capital investment of $250,000, are at the end of each year.

(a) Using at least two capital investment evaluation methods or other managerial accounting concepts studied in our course, recommend whether Brownie should go forward with the project, or not, and explain your reasoning for your conclusion.

(b) Explain and comment on the advantages and disadvantages of each investment evaluation method you considered in reaching your conclusion.

(c) Discuss the relevance of all cash flows and explain why each should or should not be included in your analysis.