Question
A locally owned restaurant is famous for making delicious burritos. The restaurant owners believe that their restaurant would do well in other college towns and
A locally owned restaurant is famous for making delicious burritos. The restaurant owners believe that their restaurant would do well in other college towns and is considering expanding operations to other locations. Each new location would require an initial investment of $8400. This investment will be depreciated on a straight line basis over the project's 5 year life. The expansion is expected to produce annual cash inflows of $6100 in consecutive years over the life of the project beginning one year from today, while also producing annual cash outflows of $3700 in consecutive years over the life of the project, also beginning one year from today. What is the project's NPV if the corporate tax rate is 38% and the project's required rate of return is 15%?
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