As a young entreprenuer,you are considering opening a new restaurant in your hometown.You plan on operating the restaurant for four years and then either expand the business or close the restaurant and move onto something else.An economist has estimated the value of your option to expand at $300,000 in today's dollars.Given the estimates below,what is the project value of the new restaurant business if cash flows are discounted at 12%?

Question

Quizplus · Accepted Answer

PV of $25,000:
N = 4,I = 12%,PV = ?,PMT = $25,000
PV = $75,933
NPV = $75,933 - $200,000 +$300,000

As a Young Entreprenuer,you Are Considering Opening a New Restaurant