Calculate the net present value of planned investment

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The director of XYZ Fried Chicken is evaluating a proposal to open a fast food restaurant in a university campus. The restaurant will cost $14.5 million to open. Expected cash flows are $4.1 million per year for five years. Both net present value and payback must be used, with a maximum payback period of three years. The after-tax cost of capital of Delta Co is 12%.

Required:

(a) Calculate the net present value of the planned investment project.

(b) Calculate the payback period of the planned investment project.

(c) Discuss the financial acceptability of the investment project.

(d) State clearly any limitations and assumptions that you made in your calculations.

Reference no: EM132715645

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