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P12-14 Sensitivity Analysis Weasley's Exterminators runs a chain pest control service cenn. ters. Analysts predict that if the company opens a location in a new
P12-14 Sensitivity Analysis Weasley's Exterminators runs a chain pest control service cenn. ters. Analysts predict that if the company opens a location in a new city, it will cos.. $900,000 up front and generate free cash flow as follows: After year three, the free cash flows will grow forever at a 3% rate. Weasley's cost of capital is 9%. a. What is the NPV of opening up a new location? b. What is the present value today of all cash flows that a new location will gener. ate from year four and beyond? What percentage of the project's total cash inflows does that account for? c. What is the NPV if the long-term growth rate in cash flows is 1% ? 0%
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