Answer:
Vanilla Bean Restaurant
The project's net present value (NPV) is:
$511,798
Step-by-step explanation:
a) Data and Calculations:
Initial project cost = $525,000 in year 1
Project's inflows in Year 4, 5, & 6 = $721,000 each
Discount rate = 16%
Present value of inflows:
Year 4 = $721,000 * 0.552 = $397,992
Year 5 = $721,000 * 0.476 = $343,196
Year 6 = $721,000 * 0.410 = $295,610
Total present value = $1,036,798
Therefore, the NPV = $511,798 ($1,036,798 - $525,000). The present value is the difference between the present value of the project's cash inflows and the present value of project's cash outflows during the project's life.