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The Hangover Diner is considering a project to build a new diner next to Saint Joseph's...

The Hangover Diner is considering a project to build a new diner next to Saint Joseph's University with an initial cost of $350,000. Construction will take 3 years. The diner will open in year 4, so no cash will be received in the first 3 years. At the end of the fourth year, the diner expected to produce a cash inflow of $100,000. Starting in the fifth year the cash flows are expected to grow by 2% per year forever. What is the project's net present value today at a 16% discount rate?

A. -$4,818

B. $44,494

C. $50,411

D. $107,613

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Answer #1

Cash flow at me = ) Cash floo at (time 5) Cash flow at (time = 6) /00000 X1o 02 Cash flos at (Hime = ) - NPV 1600 00 X102 2 -

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