What is the value of the cash flows of your business

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Question - You are planning on opening a restaurant chain. You have projected cash flows of $14 million starting next year (t = 1) with an annual growth rate of 1.5% over the foreseeable future thereafter. This endeavor will require a substantial investment and you will have to convince investors to provide you the capital to do so. You will invest some of your own money, convincing other investors will of course be useful for your valuing your own investment decision. A critical piece of your analysis is figuring out the present value of the cash flows of the business. Your research has revealed the following information. Similar restaurant businesses equity has an average beta of 1.34 and the average debt-to-value ratio in this industry is 25%. The risk-free rate is 4.00% and the expected market risk premium (the average difference between the market return and the risk-free rate) is 4.50%. What is the value of the cash flows of your business?

Reference no: EM132558109

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