Reference no: EM132526407

Point 1: Matthew Broderick thinks, with people working from home now, he has the opportunity to become a consultant. He would use his experience as Ferris Bueller to show people how to fool their bosses into thinking that they are at home working even though are napping, watching Netflix, and doing laundry. He would call the business "Your Everyday Off." To get the business started, he would invest $250,000 to research stereo equipment, doorbell systems, and dummies. He then thinks he would make $50,000 per year for the next 3 years starting a year from today. At that point, everyone would return to work so there would be no revenue for a few years. Then starting 6 years from today he would make $25,000 per year for 3 years as more people start to work at home just as part of the evolution of business. After that, his cash flows would increase by 4% per year forever.

Question 1: If Matthew has a discount rate of 15%, what is the NPV and should he start the business?