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# Potential of starting a series of restaurants

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potential of starting a series of restaurants

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1) 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 ...

#### Solution Summary

Solution analyze the potential of starting a series of restaurants

\$2.19

## 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%

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