Researching an expansion of business to serve coffee

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With an initial outlay of $50,000, Phil's Tavern is researching an expansion of their business to serve coffee and breakfast sandwiches. The owner expects to see their money returned within 3 years and estimates a required rate of return of 16%, which appears high but they feel it is justified given the success of the rest of their business. With the following projected free cash flows, should the owner proceed with the investment? Use NPV and IRR to explain your answer.

IO = $50,000

FCF Year 1 = $30,000

FCF Year 2 = $25,000

FCF Year 3 = $10,000

NPV =

IRR =

Reference no: EM132507032

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