The owner of Waco Waffle House is considering an expansion of the business He has identified two alternatives, as follows Build a new restaurant near the mall Buy and renovate an old building downtown for the new restaurant The projected cash flows from these two alternatives are shown below The owner of the restaurant uses a 6 percent after tax discount rate Investment Proposal Cash Outflow Time 0 Net After Tax Cash Inflows Years 110 Years 1120 Mall restaurant $ 872,000 $ 78,500 $ 78,500 Downtown restaurant 337,500 49,000 Includes after tax cash flows from all sources, including incremental revenue, incremental expenses, and depreciation tax shield Use Appendix A for your reference (Use appropriate factor(s) from the tables provided ) Required 1 Compute the net present value of each alternative restaurant site 2 Compute the profitability index for each alternative 3 How do the two sites rank in terms of NPV and the profitability index

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The owner of Waco Waffle House is considering an expansion of the business. He has identified two alternatives, as follows: Build a new restaurant near

The owner of Waco Waffle House is considering an expansion of the business. He has identified two alternatives, as follows:

Build a new restaurant near the mall.
Buy and renovate an old building downtown for the new restaurant.

The projected cash flows from these two alternatives are shown below. The owner of the restaurant uses a 6 percent after-tax discount rate.

Investment Proposal	Cash Outflow: Time 0		Net After-Tax Cash Inflows*
Investment Proposal	Cash Outflow: Time 0		Years 110		Years 1120
Mall restaurant	$	872,000	$	78,500	$	78,500
Downtown restaurant		337,500		49,000

* Includes after-tax cash flows from all sources, including incremental revenue, incremental expenses, and depreciation tax shield. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the net present value of each alternative restaurant site. 2. Compute the profitability index for each alternative. 3. How do the two sites rank in terms of NPV and the profitability index?