Weasleys Exterminators runs a chain pest control service centers. Analysts predict that if the company opens a location in a new city, it will cost $900,000 up front and generate free cash flow as follows:

year 1 Free cash flow $60,000

year 2 $70,000

year 3 $80,000

After year three, the free cash flows will grow forever at a 3% rate. Weasleys 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 generate from year four and beyond? What percentage of the projects total cash inflows does that account for? y

c. What is the NPV if the long-term growth rate in cash flows is 1%? 0%?