Kelly is expanding his ice cream shop to include a new line of frozen yogurt. The expansion will cost $7,600 initially, and have annual expenses of $1,100. He expects to earn $4,100 additionally per year from the expansion over the next 4 years. All revenues are at the end of the year, and all expenses are at the beginning of the year.

a. Find the payback of Kelly's investment.

year(s) month(s)

Round up to the next month

b. Fill out the Cash Flow Chart below.

CF0 =

C01 =

F01 =

C02 =

F02 =

c. Kelly has an MARR of 16% compounded annually.

Find the NPV of Kelly's investment.

Round to the nearest cent

d. Using the NPV criterion, should Kelly invest?

Yes No

e. What is the internal rate of return of this investment?

%

Round to two decimal places

if applicable Kelly's accountant feels that he should only need to earn 6% on all investments (use for the next two parts).

f. How much extra can they afford to spend on their ice cream store initial costs?

Round to the nearest cent

g. What is the minimum amount of annual revenue they need to earn on this investment?

Round to the nearest cent