Reference no: EM13204769

A small business owner who owns/operates a snow removal company is planning to diversify and begin installing in-ground swimming pools to enhance his income for the next two years. He forecasts that he and his employees will be able to install16 in-ground swimming pools this year (reaping any resulting profits at the end of the first year) and 19 pools next year (reaping resulting profits at the end of the second year). Each pool sells for $6,800 this year and $7,200 next year. Expenses (material and labor - including his own labor) are anticipated to be $3,800 per pool this year and $4,100 next year, with a fixed cost of $46,200 in each of the two years. The business owner has just paid a licensing fee of $14,000 (non-refundable) to be able to legally install pools and is making a final determination as to whether he should go forward in this business venture.

If the owner's cost of capital is 8%, should he proceed with this business?