The Hangover Diner is considering a project to build a new diner next to Saint Joseph's University with an initial cost of $555,000. Construction will take 2 year The diner will open in year 3, so no cash will be received in the first 2 years. At th end of the third year, the diner expected to produce a cash inflow of $100,000. Starting in the fourth year the cash flows are expected to grow by 2.50% per yea forever. What is the project's net present value today at a 15% discount rate?
The Hangover Diner is considering a project to build a new diner next to Saint Joseph's University with an initial cost of $555,000. Construction will take 2 year The diner will open in year 3, so no cash will be received in the first 2 years. At th end of the third year, the diner expected to produce a cash inflow of $100,000. Starting in the fourth year the cash flows are expected to grow by 2.50% per yea forever. What is the project's net present value today at a 15% discount rate?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The Hangover Diner is considering a project to build a new diner next to Saint
Joseph's University with an initial cost of $555,000. Construction will take 2 years.
The diner will open in year 3, so no cash will be received in the first 2 years. At the
end of the third year, the diner expected to produce a cash inflow of $100,000.
Starting in the fourth year the cash flows are expected to grow by 2.50% per year
forever. What is the project's net present value today at a 15% discount rate?
O -$22,711
$44,274
O $49,915
$58,552
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