Suppose Patrick Pizza Co. is considering opening a new location in California. You have been asked to conduct a capital budgeting analysis to determine its feasibility. Working with a local developer you have determined that it would cost $390,000 to purchase the necessary land and construct and furnish the restaurant. This restaurant project would have a 3-year life and be depreciated straight-line to zero, after which the accumulated effects of cooking pizza would require the restaurant be torn down and the land sold, yielding a before-tax salvage value of $50,000. You expect the restaurant to generate revenue of $500,000 per year and have operating expenses of $350,000 per year. The net working capital investment is $25,000. The tax rate is 34%.

The risk of this project is very similar to the company's other businesses. The company's capital structure is as follows:

Common Stock: 1 million shares outstanding, currently selling for $50 per share. The stock has a Beta of 1.4.

Bonds: 30,000 bonds outstanding, $1000 face value for each bond, 7.34% annual coupon, 10 years to maturity, selling at 110% of par.

Market risk premium: 8%

Risk free rate: 3%

On a piece of paper (a spreadsheet file is NOT acceptable) that you will photograph and email me, write answers to the following:

1. What is the project's operating cash flow (OCF) during its three year life?
2. What is the project's cash flow from assets (CFFA)?
3. What is the firm's weighted average cost of capital (WACC)?
4. What is the project's net present value (NPV)?

Provide the calculated NPV as the response to this question. I will find the answers to a-c in your written work.