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Year Cash Flow
1 $695,000
2 876,250
3 1,057,500
4 1,238,750
5 1,420,000

1. Calculate the IRR and NPV of this project utilizing a 12% discount rate and a 15% cap rate. Ms. Brown
was able to secure a loan for $1,540,000, and an equity investor agreed to invest the remaining
$660,000 in exchange for 20% ownership in the project.

2. What is the loan-to-value ratio for this project?

3. What would the investor’s ROI be for this 5-year project if the restaurant achieved its budgeted operating
results for the year?

4. If the investor has a hurdle rate of 15%, does this project meet or exceed the investor’s requirements?
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