Mr. Hesabu kazi is considering giving up his paid employment and going into business on his own account. He is considering buying a quarry pit with a life of about 35 years. To purchase this business, he would have to pay Ksh. 237,500 now.Mr. Kazi wishes to retire in 20 years’ time. He predicts that the next cash operating receipts from the business will be Ksh. 625,000 per annum. For the last five years, he thinks that the business could be sold for at the end of the20 years life for 750,000. Additionally, he estimates that certain capital replacement and improvement would be necessary and this should amount to 50,000 p.a. for the first five years, 75,000 for the next five years and 100,000 for the last 5 years. This expenditure would be incurred at the start of each year. Mr. Kazi has excluded compensation for himself from the above data.If he would remain in business however, he would have to leave his present job in which he earns 250,000 p.a. to finance the purchase of the business, he would have to realize his present savings which are invested to yield a return of 10% Required:Advise Mr. Kazi
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