a, b, and c please (Real options and capital budgeting) You...
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a, b, and c please
(Real options and capital budgeting) You have come up with a great idea for a Tex-Mex Thallusion restaurant. After doing a financial analysis of this verture, you estimate that the initial outlay wil be 556 milion. You also estimate that there is a 50 percent chance that this new restaurant will be well received and will produce annual cash flows of $700,000 per year forever (a perpetuity), while there is a 50 percent chance of it producing a cash flow of only $220,000 per year forever a perpetutyan't received well 1. What is the NPV of the restaurant it the required rate of rotum you use to discount the project cash nows a 12 percent b. What are the real options that this analysis may be ignoring? c. Explain why the project may be worthwhile even though you have just ontimated that is NPV in negative? a. Assume the required rate of return you use to discount the project cash flow is 12% What is the NPV of the restaurant things go wel?? SL (Round to the nearest dollar)
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