Nando's is considering releasing a new peri-peri product. Option 1 is a peri-chicken pizza and Option 2 is a peri-chicken pie. The financial manager at Nando's has prepared the following forecasts for you. Option 1 Cost of pizza ovens for all stores is R2 500 000; Oven life (usefulness) is estimated at four years; Increased cash flow profits from sales of pizzas in stores: Year 1: R750 000; Year 2: R850 000; Year 3: R950 000; Year 4: R1 050 000.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
5.2 Revision Exercise 2
Nando's
Nando's is considering releasing a new peri-peri product. Option 1
is a peri-chicken pizza and Option 2 is a peri-chicken pie. The
financial manager at Nando's has prepared the following forecasts
for you.
Option 1
Cost of pizza ovens for all stores is R2 500 000;
Oven life (usefulness) is estimated at four years;
Increased cash flow profits from sales of pizzas in stores:
Year 1: R750 000;
Year 2: R850 000;
Year 3: R950 000;
Year 4: R1 050 000.
Transcribed Image Text:5.2 Revision Exercise 2 Nando's Nando's is considering releasing a new peri-peri product. Option 1 is a peri-chicken pizza and Option 2 is a peri-chicken pie. The financial manager at Nando's has prepared the following forecasts for you. Option 1 Cost of pizza ovens for all stores is R2 500 000; Oven life (usefulness) is estimated at four years; Increased cash flow profits from sales of pizzas in stores: Year 1: R750 000; Year 2: R850 000; Year 3: R950 000; Year 4: R1 050 000.
Option 2
Cost of pie-making machines for all stores is R2 200 000;
Pie machine life (usefulness) is estimated at four years;
Increased cash flow profits from sales of pies in stores:
Year 1: R850 000;
Year 2: R850 000;
Year 3: R850 000;
Year 4: R850 000.
Calculate the payback period and NPV for each option using an
interest (discount) rate of 15%.
Transcribed Image Text:Option 2 Cost of pie-making machines for all stores is R2 200 000; Pie machine life (usefulness) is estimated at four years; Increased cash flow profits from sales of pies in stores: Year 1: R850 000; Year 2: R850 000; Year 3: R850 000; Year 4: R850 000. Calculate the payback period and NPV for each option using an interest (discount) rate of 15%.
Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Production and Cost
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education