Using the information in the assignment description:
- Prepare a capital budget for the Hot New Cafe with the net cash flows for this project over a 5-year period.
- Calculate the payback period (P/B) and the net present value (NPV) for the project.
- Answer the following questions based on your P/B and NPV calculations:
- Do you think the project should be accepted? Why?
- Define and describe Net Present Value (NPV) as it pertains to the new cafe.
- Define payback period. Assume the company has a P/B (payback) policy of not accepting projects with life of over 3 years. Do you think the project should be accepted? Why?