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Determing the relevant initial cash flow, and calculate the NPV for the investment - should they accept the project? (10 points) A Five Guys franchisee
Determing the relevant initial cash flow, and calculate the NPV for the investment - should they accept the project? (10 points) A Five Guys franchisee currently owns 3 restaurants in Philadelphia and is considering opening up a 4th location. To gauge interest the franchisee paid $30,000 for a market interest survey. To open an additional location the franchisee must pay an upfront flat fee of $75,000 to Five Guys Headquarters. The store will cost an additional $500,000 upfront to open. The owner predicts they will earn $50,000 the first year, and earning will grow at a rate of 3% forever. Assume the owner has a required rate of return of 10%
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