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You are thinking about starting a cafe. Opening requires an initial investment of $100,000 and a further investment of $50,000 one year from now. With
You are thinking about starting a cafe. Opening requires an initial investment of $100,000 and a further investment of $50,000 one year from now. With 70% probability your cafe will be a great success and generate $60,000 in year 2 and FCF will grow at 2% per year after that. Otherwise, the cafe will be only ok and generate $10,000 in year 2 and FCF will not grow. What's the NPV of investing in the cafe if your required rate of return is 11%?
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