Intro

Joe Avery recently graduated from college and has an idea for a juice shop using

only organic and locally$-$sourced ingredients. He has saved just enough money to

cover the initial investment required to open the shop, $$40,000.$ Using his

corporate finance training, he estimates that the free cash flow from the shop will

be $$10,000$ per year, forever.

Investments with similar risk deliver a rate of return of $10\%.$

Part $3$: oe Avery recently graduated from college and has an idea for a juice shop using only organic and locally$-$sourced ingredients. He has saved just enough money to cover the initial investment required to open the shop, $$24,000.$ Using his corporate finance training, he estimates that the free cash flow from the shop will be $$6,000$ per year, forever.

Investments with similar risk deliver a rate of return of $13\%.$

Fortunately, Joe's rich relatives are willing to provide him with enough capital to open another $7$ shops after the first year if there is a lot of demand. What is the true NPV of the project?