1. Calculate the Cash flows, separating clearly the Operating CFs from the Investment CFs.

2. What is the NPV?

3. What is the IRR?

4. Add a functionality to the same model that considers the following probabilities and number of people passing by:

5. Would you accept this project? (from a financial point of view) Why or Why not?

Make sure you include the numerical answer, calculations or reasoning used.

6. Your friend offers you a partnership in which you will buy 30% of the company for $400,000 (you only pay 400,000 now and will receive 30% of all future net cash flows).

Would you accept this partnership? (from a financial point of view) Why or Why not?

Make sure you include the numerical answer, calculations or reasoning used.

Transcribed Image Text:

One of your friends tells you about opening a bakery with the following characteristics: $ Periodicity Amount required Once $750,000.00 Initial refurbishment Equipment (1 lot) Rent Maintenance Services Gas Raw Materials Baker salary Salesperson salary Selling price of bread $295,000.00 Every 5 years $50,000.00 Monthly $ 5,000.00 Monthly $ 15,000.00 Monthly 200.00 Per batch $ $ 3.15 Per piece Monthly $ 15,000.00 $ 10,000.00 Monthly $ 5.00 Per piece 1 Depends on production volume Depends on production volume The sales depend on the number of people passing by the bakery, the percentage of people that make a purchase and the average number of pieces of bread that each person buys. 9500 per day 10% 5 People passing by % of passers-by that make a purchase Average pieces of bread bought per customer Consider the following additional information: The bakery will operate 360 days per year (12 months of 30 days each) The salvage value of the equipment is 10% of its cost Each baker can make 2,000 pieces of bread per day, they can work 30 days per month The number of salespeople required depends on the number of pieces sold per day. You need 1 salesperson for each 1,000 pieces of bread sold per day (with a minimum of 3 salespeople) Each production batch contains a maximum of 400 pieces of bread Your MARR is 15% The timeframe of the project is 10 years One of your friends tells you about opening a bakery with the following characteristics: $ Periodicity Amount required Once $750,000.00 Initial refurbishment Equipment (1 lot) Rent Maintenance Services Gas Raw Materials Baker salary Salesperson salary Selling price of bread $295,000.00 Every 5 years $50,000.00 Monthly $ 5,000.00 Monthly $ 15,000.00 Monthly 200.00 Per batch $ $ 3.15 Per piece Monthly $ 15,000.00 $ 10,000.00 Monthly $ 5.00 Per piece 1 Depends on production volume Depends on production volume The sales depend on the number of people passing by the bakery, the percentage of people that make a purchase and the average number of pieces of bread that each person buys. 9500 per day 10% 5 People passing by % of passers-by that make a purchase Average pieces of bread bought per customer Consider the following additional information: The bakery will operate 360 days per year (12 months of 30 days each) The salvage value of the equipment is 10% of its cost Each baker can make 2,000 pieces of bread per day, they can work 30 days per month The number of salespeople required depends on the number of pieces sold per day. You need 1 salesperson for each 1,000 pieces of bread sold per day (with a minimum of 3 salespeople) Each production batch contains a maximum of 400 pieces of bread Your MARR is 15% The timeframe of the project is 10 years

Answer rating: 100% (QA)

ANSWER 1 Cash flows separating Operating CFs from Investment CFs Operating Cash Flows Revenue from bread sales 9500 01 5 315 360 6282600 assuming 360 ... View the full answer