With an initial outlay of $100,000, Goldie’s Retreat is researching an expansion of their bed-n-breakfast by offering a Sunday brunch. The owner expects to see their money returned within 4 years and estimates an expected rate of return of 7%. With the following projected free cash flows, should the owner proceed with the investment? Use NPV and IRR to explain your answer.
IO = -$100,000
FCF Year 1 = $50,000
FCF Year 2 = $25,000
FCF Year 3 = $15,000
FCF Year 4 = $12,000
A. NPV = ______
B. IRR = _______
C. Should they proceed with the investment and why. _____________________
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