Question

A local music store that hosts live music has been a very popular hangout for years. However, the owner is concerned that the increasing popularity of new methods of music delivery will soon make the business obsolete. The owner is considering building a small recording studio in the basement of the store. The nearest professional studio is 50 miles away, so a new studio may appeal to local musicians and increase foot traffic. The owner has all the costs of building the studio and has also estimated how much revenue might increase due to the new studio (from studio rental fees, increased food and drink sales if more people come to the live music shows, etc.). The owner will use this information to determine the net present value for the studio. Which method of analysis should this owner use to make a determination

Answer 1

quantitative analysis

Step-by-step explanation:

In business, quantitative analysis uses information collected form the own business in order to analyze the future outcome of related projects. Quantitative analysis can used to analyze purchasing, marketing, investment, sales decisions.

In this case, the owner of the music store is trying to determine if building a record studio will be profitable or not. He needs to compare the information he has about the necessary investment to carry out the new project with the project's expected cash flows. That way he will determine if the project's NPV and determine if it is worth it or not.