Chapter 4: Darren Mack owns the Gas n' Go convenience store and gas station. After hearing a marketing lecture, he realizes that it might be possible to draw more customers to his high-margin convenience store by selling his gasoline at a lower price. However, the Gas n' Go is unable to qualify for volume discounts on its gasoline purchases, and therefore cannot sell gasoline for profit if the price is lowered.

Each new pump will cost $135,000 to install, but will increase customer traffic in the store by 14,000 customers per year. Also, because the Gas n' Go would be selling its gasoline at no profit, Darren plans on increasing the profit margin on convenience store items incrementally over the next five years. Assume a discount rate of 9 percent. The projected convenience store sales per customer and the projected profit margin for the next five years are as follows:

Year	Projected Convenience Store Sales Per Customer	Projected Profit Margin
1	$6	15%
2	$7.50	20%
3	$10	25%
4	$13	30%
5	$14	35%

1. What is the NPV of the next five years of cash flows if Darren had five new pumps installed now (Year 0)?
2. If Darren required a payback period of four years, should he go ahead with the installation of the new pumps?