Raphael Restaurant is considering the purchase of a $12,000 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight line method. The machine will produce 1,900 soufflés per year, with each costing $2.20 to make and priced at $5. Assume that the discount rate is 14 percent and the tax rate is 34 percent. Should Raphael make the purchase?

After year 5, Raphael Restaurant's free cash flow will grow at a rate of 3.5% indefinitely. If Raphael has $13,000 in debt and 350 shares of common stock outstanding, what is the price per share?

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