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Two people have come to your restaurant with different offers. Sam T'll sell you a brand new soft-serve ice cream machine. It'll cost $4,000 and
Two people have come to your restaurant with different offers. Sam "T'll sell you a brand new soft-serve ice cream machine. It'll cost $4,000 and should provide you with an extra $1,000 of revenue every year. You'll only have to pay about $100/year to maintain it, and it should last for nine years. Ella "I run a party venue just down the street from your restaurant. I'll charge you $10,000 to put signage up in the venue, and you can become my preferred caterer for weddings, bar mitzvahs, etc. I bet I can get you $50,000 of additional revenue every year, and I know your contribution margin is around 15%. Let's say this arrangement will last for five years." Your required rate of return is 7%. 1 What's the payback period for each of these offers? 2 What's the NPV of each of these offers? 3 What's the approximate IRR of each of these offers
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