An entrepreneur is considering opening up a restaurant off of a popular biking trail. The start-up cost to open this restaurant off this popular biking trail is expected to be $350,000. The new restaurant is expected to lose $100,00 the first 2 years before becoming profitable in year three with a positive $75,000 cash flow. After becoming profitable, the cash flows are expected to grow at 20% per year for 5 years. What return can this entrepreneur expect given these estimates and should this project be accepted or rejected? You will need to calculate the MIRR and Payback Period for this proposed project in order to explain if this project should be accepted or rejected. Use MIRR and Payback Period to explain your reasoning for accepting or rejecting this project proposal
An entrepreneur is considering opening up a restaurant off of a popular biking trail. The start-up cost to open this restaurant off this popular biking trail is expected to be $350,000. The new restaurant is expected to lose $100,00 the first 2 years before becoming profitable in year three with a positive $75,000 cash flow. After becoming profitable, the cash flows are expected to grow at 20% per year for 5 years.
What return can this entrepreneur expect given these estimates and should this project be accepted or rejected?
You will need to calculate the MIRR and Payback Period for this proposed project in order to explain if this project should be accepted or rejected. Use MIRR and Payback Period to explain your reasoning for accepting or rejecting this project proposal
Step by step
Solved in 4 steps with 7 images
