In late 2018, Mike was approached by a representative of a company called Cycle Tech Inc. (CTI) and asked if he would be interested in incorporating its proprietary technology, CycleScape, into PHL's operations.

CycleScape is revolutionizing indoor cycling with a "4D" cycling experience that requires the installation of a curved, floor-to-ceiling screen that plays video footage from exciting, real-life, outdoor cycling experiences. Special stationary bikes are installed that vibrate to simulate the experience of riding over the terrain shown on the screen, and customers are provided with patented CycleScape 3D glasses, designed to be worn while cycling. Finally, the studio itself is customized for the 4D experience, with large vents installed to mimic wind, mist, rain, and even snow. The costs to outfit a studio with all of the required CycleScape technology are as follows:

CycleScape stationary bikes$2,400/bike

CycleScape 3D glasses$139/pair

Floor-to-ceiling curved screen$11,000

4D experience all-weather vents$25,000

Installation costs $60/labour hour

Mike wants to convert one of the studios using the CycleScape technology. Each studio currently houses 24 bikes, and the representative from CTI indicated that a typical installation requires about 10 hours of labour from a trained electrician. In addition, PHL studio employees will require training on the safe use of the system, which CTI can provide for a flat fee of $4,000. CTI indicated that it has installed the system in only a limited number of cycling studios across Canada. According to CTI, on average, the studios experience an increase in annual revenue of $21,000, resulting from improved customer attendance and the higher class fees charged for the CycleScape experience. Annual service and maintenance fees for inspection by a trained CycleScape attendant are expected to be $1,200 per year. Mike would like you to calculate how long it would take PHL to generate enough additional income to pay back the upfront investment required to install the CycleScapetechnology (ignoring any tax implications).

In addition, Mike would like you to discuss any qualitative factors relating to the CycleScape experience and the fit with PHL's current operations.

Provide Mike with an overall recommendation for the business, including whether to pursue the installation of CycleScape.