QUESTION A

Mary and Shelley have plans for expanding the caf by adding an outside dining area. They have been given costed designs by two local firms: Smith and Jones. These differ in terms of initial cost and the pattern of cashflows, as shown in the table below, with the Smith design offering higher capacity, but costing more (all cashflows are in thousands).

Desig Initial Outlay Year Year Year Year Year Year n (Year 0) 2 3 4 5 6 Smith (85) 15 25 40 35 35 35 Jones (50) 10 15 20 25 30 35