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Net Present Value Analysis of a Company

You and your friends have decided to examine the potential of starting a series of restaurants in and around college campuses in Boston that cater exclusively to students. Assume that (together) you have $120,000 (equity) for this project which requires an initial investment of $200,000. The remaining amount of $ 80,000 can be raised through issuing bonds. You are given the following additional information about the project.
Year Free Cash Flow
1 $ 20,000
2 $ 40,000
3 $ 60,000
4 $ 80,000
5 $ 100,000
Other Information
Beta based on similar businesses 2.00
Risk Free Rate 4.50% / year
Market Risk Premium 8.00% / year
Price per Bond $ 1,050
Face Value of Bonds $ 1,000
Coupon Rate on Bonds 8.50 %
Coupons Paid Monthly
Maturity of Bonds 5 years
Tax rate for firm 30%

Will you accept or reject this project? Why?

Please show your work to help me going forward.

Solution Summary

This solution deals with issues under finance and shows how to calculate the weighted average cost of capital and net present value with step-by-step calculations enclosed in an Excel file.