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You have dreamt about running an inn with a high-end pub or even better - a chain of inns. The starting cost of one inn is 256000 and you estimate it to have a useful lifetime of 12 years. The incremental Free Cash Flows are 38400 per year. The inn has no salvage value. The project discount rate is 10% p... and the risk-free rate is 2 % p.a. You plan to run "Finn Inn' for 4 years and learn the tricks of the trade, and then (and only then) possibly open up 12 more similar inns. You have estimated the inn business volatility to be 60% p.a. a. What is the NPV of your first inn? b. What is the total NPV of your inn chain dream (=1 +12 inns)? c. What is the break-even (average) annual expected Free Cash Flow level for an inn, as seen in year 4, for you to go ahead with the big launch? d. Your friend suggests you have seriously overestimated in business volatility. What is the total NPV of your dream (1+12) if the volatility is in fact 20% p.a.? e. Your friend also warns that inn business has low entry barriers and fierce competition such that you should expect 5% lower annual cash flow growth rate (=continuous dividend yield). With the lower volatility and the impact of competition, what is the total NPV of your dream (1+12) ins You have dreamt about running an inn with a high-end pub or even better - a chain of inns. The starting cost of one inn is 256000 and you estimate it to have a useful lifetime of 12 years. The incremental Free Cash Flows are 38400 per year. The inn has no salvage value. The project discount rate is 10% p... and the risk-free rate is 2 % p.a. You plan to run "Finn Inn' for 4 years and learn the tricks of the trade, and then (and only then) possibly open up 12 more similar inns. You have estimated the inn business volatility to be 60% p.a. a. What is the NPV of your first inn? b. What is the total NPV of your inn chain dream (=1 +12 inns)? c. What is the break-even (average) annual expected Free Cash Flow level for an inn, as seen in year 4, for you to go ahead with the big launch? d. Your friend suggests you have seriously overestimated in business volatility. What is the total NPV of your dream (1+12) if the volatility is in fact 20% p.a.? e. Your friend also warns that inn business has low entry barriers and fierce competition such that you should expect 5% lower annual cash flow growth rate (=continuous dividend yield). With the lower volatility and the impact of competition, what is the total NPV of your dream (1+12) ins

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