Question
I own a pizza restaurant and I am trying to determine if I should purchase a new oven for my restaurant which will help me
I own a pizza restaurant and I am trying to determine if I should purchase a new oven for my restaurant which will help me make pizzas faster and better or I should purchase a new stove which will allow me to branch out of pizzas and into other dishes.
The pizza oven costs $100,000 to replace the current oven and the stove would cost the same due to additional changes to kitchen layout and restaurant renovations. I would have to borrow the money at 10% from the bank, the useful life of each asset is ten years, anticipate increasing sales of pizzas by $10,000 a year or by starting the new dishes I would increase sales $25,000 a year and there would be no resale value of either item. The pizza oven will also help me reduce costs $5,000 a year while the cost of materials for my new dishes would add $5,000 a year in costs.
What do you think about relevant costs and cash flows just from information provided here?
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