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300,000 finance with debt. What is the payback period, IRR and profitability Index? Year 1 Year 2 Year 3 Year 4 years 1) Sales $300,000

300,000 finance with debt. What is the payback period, IRR and profitability Index?

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Year 1 Year 2 Year 3 Year 4 years 1) Sales $300,000 $600,000 $900,000 $1,000,000 $1,000,000 2) Cash flows from operations -$100,000 $ 50,000 +$ 75,000 +$ 250,000 +$ 250,000 3) Increase in working capital $ 50,000 $ 20,000 $ 10,000 $ 10,000 ) Net cash flows (2) - (3) -$150,000 -$ 70,000 $ 65,000 $ 240,000 $ 250,000 Present value of net cash flows in years 1-4 (discounted at 20%) -$ 20,255 Present value of terminal value $250,000 0.20 X +$602,816 (1.20) Present value of restaurant $ 582,561 -Cost of building -$700,000 Net present value of restaurant -$117,439

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