Use Cheesecake Factory 2011 Annual Report. 1. New restaurant development is expected to be 20 restaurants in the next fiscal year. Each restaurant costs approximately $5 million to open: $1.5 million for land, $2 million for equipment and $1.5 million for pre-opening costs. The pre-opening costs are capitalized and amortized over 10 years. The company will raise the proceeds by issuing bonds with a maturity of 10 years, coupon rate of 8.5% and a market rate of 9%. The company currently has 170 restaurants open and it expects these 20 new restaurants to have a higher annual sales volume than the current stores opens. The stores to be opened will be in very high foot traffic areas and the expectation is average sales for these 20 stores will be 20% higher than the current average annual sales per restaurant. Total expenses for these restaurants are expected to be 75% of revenue, excluding depreciation, interest and taxes. For depreciation, use MACRS. a. How many bonds will the company have to issue to finance the 20 store expansion? b. What is the current WACC for Cake and what is the revised WACC for the company after bond issuance? c. What is the NPV, IRR and payback for this project? d. Should this project be approved? Why or why not? e. Everything else being equal, what would be the change to NPV if the company were able to sell all of the land at book value at the end of the 10 year project? f. At the end of the first year, what would be the change to net income and EPS ? g. How many new stores of this type would have to be opened to double EPS? h. Everything else being equal, what is the minimum annual cashflow required to approve this project? i. Everything else being equal, what would the change to the NPV be if other Cheesecake Factory store sales were cannibalized and resulted in a revenue decline of 3% of the existing stores sales volume.