Phil’s is a sit-down restaurant that specializes in home-cooked meals. Theresa’s is a walk- in deli that specializes in specialty soups and sandwiches. Both firms are currently considering expanding their operations during the summer months by offering pre-wrapped doughnuts, sandwiches, and wraps at a local beach. Phil’s currently has a WACC of 14% while Theresa’s WACC is 10%.

The expansion project has a projected net present value of £12,600 at a 10% discount rate and a net present value of -£2,080 at a 14% discount rate.

(a) Which firm or firms should expand and offer food at the local beach during the summer months? Discuss your point of view.

Answer rating: 100% (QA)

Certainly To calculate the net present value NPV of the expansion project for Phils and Theresas we ... View the full answer