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Pizza Palace is a pizza restaurant known for its posh d cor and its brick - oven pizza. Pizza Palace has five brick ovens that

Pizza Palace is a pizza restaurant known for its posh dcor and its brick-oven pizza. Pizza Palace has five brick ovens that need attention and is considering two options. Both options will cost around $1,000,000(initial investment). Option 1 is to refurbish its current brick-ovens. If refurbished, Pizza Palace expects the ovens to last another 6 years. The average annual income from refurbishing the ovens is $183,333.33. Refurbishing the ovens will have no salvage value. Option 2 is to replace the current ovens. New ovens would last 8 years and have no salvage value. The average annual income from buying a new oven is $143,750. Pizza Palace expects the following net cash inflows from the two options:
Year Refurbish Current Ovens Purchase New Ovens
1 $600,000 $800,000
2 $500,000 $600,000
3 $400,000 $300,000
4 $300,000 $200,000
5 $200,000 $100,000
6 $100,000 $50,000
7 $50,000
8 $50,000

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