You are working in a strategic management role at Best Bean, Inc., a chain of coffee shops. Your
team is considering expanding in 2020 by building one or more new retail outlets in the Detroit
area. Four locations (A, B, C, and D) are being considered. Locations A, B, and C are ten year
investments, with income projections shown in the "Location Data" tab. Location D is an eight
year investment. Locations C and D are also very near each other in Allen Park, and so should be
considered mutually exclusive (that is, Best Bean might invest in one or the other, but not both).
Your manager has asked you to prepare a report on how best to use the capital budget of $3.55 million.
This may include investing in one of the available locations, or it may not. If it is possible under the
$3,550,000 budget, you may recommend investing in more than one location.
In an Excel file:
Calculate the following for each location:
	Cash payback period
	Net present value
	Internal rate of return
	Profitability index
	Average rate of return
Use a discount rate of 12% (Best Bean's minimum rate of return) where necessary. Show all answers to
two decimal places (dollars and percentages). Note some helpful formulas in the "Excel TVM formulas"
tab.
In a Word document:
Prepare a memo summarizing your findings and recommendations.

Location A Initial investment Residual value Annual depreciation 2,346,000 234,600 Projected income: Revenues Expenses Net income 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 769,900 769,900 769,900 769,900 769,900 769,900 769,900 769,900 769,900 769,900 586,100 586,100 586,100 586,100 586,100 586,100 586,100 586,100 586,100 586,100 183,800 183,800 183,800 183,800 183,800 183,800 183,800 183,800 183,800 183,800 Location B Initial investment 1,736,000 Residual value 200,000 Annual depreciation 153,600 Projected income: Revenues 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 666,100 666,100 666,100 666,100 666,100 666,100 666,100 666,100 666,100 666,100 531,400 531,400 Expenses 531,400 134,700 531,400 531,400 531,400 531,400 531,400 531,400 134,700 531,400 134,700 Net income 134,700 134,700 134,700 134,700 134,700 134,700 134,700 Location C 1,536,000 Initial investment Residual value Annual depreciation 153,600 Projected income: 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Revenues 576,400 576,400 566,400 566,400 556,400 556,400 546,400 546,400 536,400 536,400 Expenses 445,900 445,900 445,900 445,900 445,900 445,900 445,900 445,900 445,900 445,900 Net income 130,500 130,500 120,500 120,500 110,500 110,500 100,500 100,500 90,500 90,500 Location D Initial investment Residual value Annual depreciation 1,966,000 300,000 208,250 Projected income: 2020 2021 2022 2023 2024 2025 2026 2027 838,100 Revenues 838,100 838,100 838,100 838,100 838,100 838,100 838,100 Expenses 671,900 671,900 671,900 671,900 671,900 671,900 671,900 671,900 166,200 Net income 166,200 166,200 166,200 166,200 166,200 166,200 166,200 *- Fxpense fiaures shown include denreciation. With the excention of depreciation allexpenses are assumed paid in cash