Question

Darren mack owns gas n' go convenience store and gas station. after hearing a marketing lecture, he realizes that it might be possible to draw more customers to his high margin convenience store by selling his gasoline at a lower price. however, gas n' go is unable to qualify for volume discounts on its gasoline purchases, and therefore cannot sell gasoline for profit if the prices lowered. each new pump wells cost $95,000 to install, but will increase customer traffic in the store by 1000 customers per year. also, because the gas n' go would be selling its gasoline at no profit, darren plans on increasing the profit margin on the convenience store items incrementally over the next five years. assume a discount rate of 8%. the projected convenience store sales per customer and the projected profit margin for the next five years are as follows:

Answer 1

The answer is It needs to guarantee that the underlying venture can be paid inside four years, which is the recompense time frame. Be that as it may, there are no benefits before five years' over which is shown by the following present esteem.

Explanation:

Add up to money outpouring = 4 x $95000

= $380000

Net present esteem = add up to trade out stream - add up to money out stream

= $13876447-$380000

= - 241235.53.

The NPV is negative.