The owner of Zivanov's Pancake 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 14 percent after-tax discount rate. Net After-Tax Cash Inflows Investment Cash Outflow: Proposal Time 0 Years 1-10 Years 1120 Mall restaurant $539.500 $86,000 $86.000 Downtown restaurant 255.000 53,500 *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. (Round your final answers to the nearest dollar.) Net Present Value Mall restaurant Downtown restaurant 2 Compute the profitability Index for each alternative. (Round your answers to 2 decimal places.) Profitablility Index Mall restaurant Downtown restaurant 3. How do the two sites rank in terms of NPV and the profitability Index? NPV Profitablility Index Mall restaurant Downtown restaurant Future Value and Present Value Tables Table 1 Future Value of $1.00(1 + " 6% 8% 10% 12% 14% 20% Perlod 1 2 3 4% 1.040 1.082 1.125 1.170 1.217 1.060 1.124 1.140 1.300 1.120 1.254 1.405 1.574 1.762 1.191 1.263 1.338 4 1.482 1.689 1.925 5 1.080 1.166 1.260 1.361 1.469 1.587 1.714 1.851 1.999 2.159 1.200 1.440 1.728 2.074 2.488 2.986 3.583 4.300 5.160 6.192 6 7 8 9 1.100 1.210 1.331 1.464 1.611 1.772 1.949 2.144 2.359 2.594 2.853 3.139 3.452 3.798 4.177 1.266 1.316 1.369 1.423 1.480 1.540 1.601 1.665 1.732 1.801 1.419 1.504 1.594 1.690 1.791 1.898 2.012 2.133 2.261 2.397 10 1.974 2.211 2.476 2.773 3.106 3.479 3.896 2.195 2.502 2.853 3.252 3.707 4.226 4.818 5.492 6.261 7.138 11 12 13 14 15 2.332 2.518 2.720 2.937 3.172 4.661 10.063 21.725 4.364 4.887 5.474 7.430 8.916 10.699 12.839 15.407 38.338 237.380 1,469.800 20 30 40 2.191 3.243 4.801 3.207 5.744 10.286 6.728 17.450 45.260 9.646 29.960 93.051 13.743 50.950 188.880 Period 4% 6% 8% 10% 12% 14% 20% Table II Future Value of a Series of $1.00 Cash Flows (Ordinary Annuity) (1 + 1"-1 1 1.000 2.040 3.122 4.247 5.416 2 3 4 5 1.000 2.060 3.184 4.375 5.637 1.000 2.080 3.246 4.506 5.867 1.000 2.100 3.310 4.641 6.105 1.000 2.120 3.374 1.000 2.220 3.640 5.368 7.442 r 4.779 6.353 1.000 2.140 3.440 4.921 6.610 8.536 10.730 13.233 16.085 19.337 7.336 8.923 6 7 8 9 10 6.633 7.898 9.214 10.583 12.006 10.637 12.488 14.487 7.716 9.487 11.436 13.580 15.938 8.115 10.089 12.300 14.776 17.549 6.975 8.394 9.898 11.491 13.181 14.972 16.870 18.882 21.015 23.276 9.960 12.916 16.499 20.799 25.959 32.150 39.580 48.497 59.196 72.035 11 12 13 14 15 13.486 15.026 16.627 18.292 20.024 16.646 18.977 21.495 24.215 27.152 18.531 21.385 24.523 27.976 31.773 20.655 24.133 28.029 32.393 37.280 23.045 27.271 32.089 37.581 43.842 57.276 91.025 20 30 40 29.778 56.085 96.026 36.778 79.058 154.762 45.762 113.283 259.057 164.496 442.597 75.052 241.330 767.090 356.790 1,342.000 186.690 1,181.900 7,343.900 Table III Present Value of $1.00 1 (1 + )" Period 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 1 .833 .893 .797 .926 .857 .794 2 3 .962 .925 .889 .855 .909 .826 .751 .694 .877 .769 .675 .592 .862 .743 .641 .552 .820 .672 .551 ,451 .806 .650 .524 423 .794 .630 .500 .397 .847 .718 .609 .516 437 .370 .314 .781 .610 .477 .373 .579 482 4 5 5 .476 .943 .890 .840 .792 .747 .705 .665 .627 .592 .558 .735 .681 .630 .583 .822 .790 .760 .731 .703 .676 .712 .636 .567 .507 ,452 ,404 .361 .322 .341 .275 .222 6 7 .519 .456 .400 .351 .308 .270 .683 .621 .564 .513 467 424 .386 .350 .319 .290 .263 .239 .402 .335 279 233 .194 .162 .370 303 .249 .204 .167 .137 .315 .250 .198 157 .769 .592 .455 .350 .269 .207 .159 .123 ,094 .073 .758 .574 ,435 .329 .250 .189 .143 .108 ,082 ,062 .291 .227 .178 .139 . 108 .085 410 .354 305 263 .227 8 9 10 .540 .500 .266 .225 .191 .179 .144 .116 .125 .463 .099 11 .650 .527 .429 .237 .135 .112 .094 .079 .066 .047 12 13 14 15 .625 .601 .577 .555 .497 ,469 442 ,417 .397 .368 .340 .315 .287 .257 .229 .205 .183 208 .182 .160 .140 .195 .168 .145 .125 . 108 .051 .162 .137 .116 .099 .084 .037 .007 .001 .112 .093 .078 .066 .026 .092 .075 .062 .051 .076 .061 .049 .040 .062 .050 .039 ,031 .052 .040 .032 .025 ,056 .043 ,033 .025 .020 .036 .027 .021 .016 ,456 215 .073 .019 .010 .007 ,005 .004 20 30 40 .312 174 .097 .149 .067 .014 .002 .104 .033 .011 .003 308 .208 .001 .001 .099 .046 .020 .005 .012 .003 .004 .001 .022 - Table IV Present Value of Series of $1.00 Cash Flows 1 (1 + m) / (i-dl Period 4% 6% 8% 14% 16% 18% 20% 22% 24% 25% 26% 28% 30% 1 0.794 1.424 2 3 4 5 0.962 1.886 2.775 3.630 4.452 0.833 1.528 2.106 2.589 0.862 1.605 2.246 2.798 3.274 10% 12% 0.909 0.896 1.736 1.690 2.487 2.402 3.170 3.037 3.791 3.606 4.355 4.111 4.868 4.564 5.335 4.968 5.759 5.328 6.145 5.650 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 0.781 1.392 1.868 2.241 2.532 0.800 1.440 1.952 2.362 2.689 2.951 3.161 3.329 0.769 1.361 1.816 2.166 2.436 2.991 1.923 2.320 2.635 2.885 3.083 3.241 6 7 5.242 6.002 6.733 3.685 4.039 4.344 4.607 3.326 3,605 3.837 0.820 1.492 2.042 2.494 2.864 3.167 3.416 3.619 3.786 3.923 4.035 4.127 4.203 4.265 4.315 8 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 9.818 11.258 11.925 9 2.759 2.937 3.076 3.184 3.269 7.435 8.111 3.463 3.571 0.806 1.457 1.981 2.404 2.745 3.020 3.242 3.421 3.566 3.682 3.776 3.851 3.912 3.962 4.001 4.110 4.160 4.166 4.946 5.216 5.453 5.660 4.833 5.938 10 11 12 13 14 15 3.656 3.725 2.643 2.802 2.925 3.019 3.092 3.147 3.190 3.223 3.249 3.268 8.760 9.385 9.986 10.563 7.887 8.384 8.853 9.295 4.303 4.494 4.656 4.793 4.910 5.008 5.092 6.496 6.814 7.103 7.367 7.606 8.514 9.427 9.779 3.335 3.387 3.427 6.194 6.424 6.628 6.811 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.870 4.979 4.997 5.029 5.197 5.342 5.468 5.575 5.929 6.177 6.234 3.780 3.824 3.859 3.366 3.465 3.544 3.606 3.656 3.696 3.726 3.808 3.842 3.846 5.842 6.002 6.142 6.623 7.003 7.105 9.712 11.118 13.590 17.292 19.793 20 30 3.316 11.470 13.765 15.046 7.469 8.055 8.244 5.353 5.517 5.548 4.460 4.534 4.544 3.459 3.483 3.546 3.569 3.571 3.964 3.995 3.999 3.332 3.333 40