Jamie Oliver is considering expanding his restaurant trade. He has the following two proposals to consider. A minimum of a 12% return on investment is required from the recommended project.
Proposal 1:
A restaurant in Birmingham City Centre seating for 100 guests. The complex will be built at an initial cost of £450,000.
Proposal 2:
A restaurant in Nottingham City Centre seating capacity 250. Cost to build £600,000.
?Projected cash flow and profits are as follows:
Required: Calculate for both proposals
- Net Present Value @ 12% return
- Payback period
- Accounting Rate of Return
Evaluate the business proposals using the calculations above to explain which proposal may be worth pursuing. Identify the advantages and limitations of each method in your explanation and what considerations Jamie Oliver must take into account before undertaking such investment opportunity.