Answer Happy

You are the Vice President for Operations at Taquería Auténtica, an authentic Mexican taco restaurant expanding quickly throughout Texas. The company wants to invest in corporate owned chains for five years, prove the market concepts, and then sell them off as franchises after they have demonstrated proof of concept to potential owners. You have spent some time looking at potential locations in Granbury and Stephenville. Based on the specific locations the start-up costs would be $925,912 for Granbury, and $726,403 for Stephenville. The business risk at each location would be similar to risks at the overall corporation, and should require a weighted average cost of capital of 7.18%. The investment in one location does not affect the ability of the company to invest at the other location in any way. Calculate the net present value of both projects, and enter in the box below how much the value of the firm is expected to increase based on this capital budget (please enter the amount to the nearest penny). Year 1 Year 2 Granbury Stephenville $63,373 $-8,185 $05 142 $72.014

$726,403 for Stephenville. The business risk at each location would be similar to risks at the overall corporation, and should require a weighted average cost of capital of 7.18%. The investment in one location does not affect the ability of the company to invest at the other location in any way. Calculate the net present value of both projects, and enter in the box below how much the value of the firm is expected to increase based on this capital budget (please enter the amount to the nearest penny). Year 1 Year 2 Year 3 Year 4 Year 5 Granbury Stephenville $63,373 $-8,185 $95,143 $72,014 $69,055 $54,107 $110,657 $79,102 $734,557 $1,581,540