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You have come up with a great idea for Tex-Mex-Thai fusion restaurant. After doing a financial analysis of this venture, you estimate that the initial
You have come up with a great idea for Tex-Mex-Thai fusion restaurant. After doing a financial analysis of this venture, you estimate that the initial outlay will be $5.7 million. You also estimate that there is a 50% chance that this new restaurant will be well received and will produce annual cash flow's of $800,000 per year forever (a perpetuity), while there is a 50% chance of it producing a cash flow of only $220,000 per year forever (a perpetuity) if it isn't received well.
A) if there is a 50% chance at this new restaurant will be well received and a 50% chance it will not be received well, what is the expected NPV of the restaurant?
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