Q6 Question 6 10 Points The owner of Lobster's Lair is considering selling his restaurant and retiring. An investor has offered to buy Lobster's Lair for $350,000 whenever the owner is ready to retire. The owner is considering the following three options: Option 1: Sell the restaurant now and retire. Option 2: Hire someone to manage the restaurant for the next year and then retire. This will require the owner to spend $40,000 now but will generate $100,000 in additional net cash flow at end of the year. At the end of one year, the owner will sell the restaurant. Option 3: Scale back the restaurant's hours and into retirement over the next year. This will require the owner to spend $40,000 now but will generate $75,000 additional next cash flow at the end of the year. At the end of one year, the owner will sell the restaurant. The discount rate is 15% per annum. Note: You may type your responses to each part in the spaces provide below. Alternatively, you may upload your handwritten and scanned answers to each question part below. (Do not upload the answers to any other questions here as they will not be marked.) Q6.1 Question 6.1 1 Point What is the NPV of option 1? Show all calculations. Please select file(s) Select file(s) Enter your answer here Q6.2 Question 6.2 2 Points What is the NPV of option 2? Show all calculations. Please select file(s) Select file(s) Enter your answer here Q6.3 Question 6.3 2 Points What is the NPV of option 3. Show all calculations. Please select file(s) Select file(s) Enter your answer here Q6.4 Question 6.4 2 Points Which of the three options should the restaurant owner choose and why? Explain. Please select file(s) Select file(s) Enter your answer here Q6.5 Question 6.5 3 Points If the restaurant had $100,000 in fixed assets that could be depreciated on a straight line basis at 25% per annum and the tax rate is positive, would your answer to part 6.4 change, and how? Explain. (Note: You do not have to redo the calculations in parts 6.1 6.3 to answer this part.) Please select file(s) Select file(s) Enter your answer here Q6 Question 6 10 Points The owner of Lobster's Lair is considering selling his restaurant and retiring. An investor has offered to buy Lobster's Lair for $350,000 whenever the owner is ready to retire. The owner is considering the following three options: Option 1: Sell the restaurant now and retire. Option 2: Hire someone to manage the restaurant for the next year and then retire. This will require the owner to spend $40,000 now but will generate $100,000 in additional net cash flow at end of the year. At the end of one year, the owner will sell the restaurant. Option 3: Scale back the restaurant's hours and into retirement over the next year. This will require the owner to spend $40,000 now but will generate $75,000 additional next cash flow at the end of the year. At the end of one year, the owner will sell the restaurant. The discount rate is 15% per annum. Note: You may type your responses to each part in the spaces provide below. Alternatively, you may upload your handwritten and scanned answers to each question part below. (Do not upload the answers to any other questions here as they will not be marked.) Q6.1 Question 6.1 1 Point What is the NPV of option 1? Show all calculations. Please select file(s) Select file(s) Enter your answer here Q6.2 Question 6.2 2 Points What is the NPV of option 2? Show all calculations. Please select file(s) Select file(s) Enter your answer here Q6.3 Question 6.3 2 Points What is the NPV of option 3. Show all calculations. Please select file(s) Select file(s) Enter your answer here Q6.4 Question 6.4 2 Points Which of the three options should the restaurant owner choose and why? Explain. Please select file(s) Select file(s) Enter your answer here Q6.5 Question 6.5 3 Points If the restaurant had $100,000 in fixed assets that could be depreciated on a straight line basis at 25% per annum and the tax rate is positive, would your answer to part 6.4 change, and how? Explain. (Note: You do not have to redo the calculations in parts 6.1 6.3 to answer this part.) Please select file(s) Select file(s) Enter your answer here