CHAPTER 13 Capital Budgeting decisions Scenario Your client owns a successful restaurant in downtown Chicago. She wants to open a second restaurant in the suburbs and has asked you to help her choose between two locations Key information is listed below. Using the four capital budgeting methods that we know prepare a presentation that shows your recommendation to your client (and why). Oak Park $2,500,000 Rosemont $2,500,000 Initial Investment Annual cash inflows $1,200,000 $1,000,000 $400,000 Annual cash outflows $550,000 Annual non-cash (all depreciation) expenses Use straight line depreciation to find! # of years of expected useful life of project For both, assume no residual value and: Discount Rate 7% 1. What is simple rate of return? 2. What is the net present Value? 3. What is internal rate of return? 4. What is the payback (period)