The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises. Here are the net cash flows (in thousand $) To determine: The definition of internal rate of return and the IRR of each franchise’s.

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Answer 1

Question

Chapter 10, Problem 4MC

a)

Summary Introduction

Case summary:

The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises.

Here are the net cash flows (in thousand $)

To determine: The definition of internal rate of return and the IRR of each franchise’s.

b)

Summary Introduction

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

c)

Summary Introduction

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

d)

Summary Introduction

To determine: Whether IRR changes with respect to change in cost of capital.

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A project should be accepted if its internal rate of return exceeds: O the rate of return on a government bond. the rate the company pays on borrowed funds. O zero. O the company's required rate of return.

What can you calculate with the Excel argument FV? Number of periods of time for a loan or investment. Interest rate. Future value of an investment based on a constant interest rate. The constant periodic payment required to pay off a loan or investment.

Answer 2

Question

Chapter 10, Problem 4MC

a)

Summary Introduction

Case summary:

The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises.

Here are the net cash flows (in thousand $)

To determine: The definition of internal rate of return and the IRR of each franchise’s.

b)

Summary Introduction

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

c)

Summary Introduction

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

d)

Summary Introduction

To determine: Whether IRR changes with respect to change in cost of capital.

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Answer 3

Question

Chapter 10, Problem 4MC

a)

Summary Introduction

Case summary:

The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises.

Here are the net cash flows (in thousand $)

To determine: The definition of internal rate of return and the IRR of each franchise’s.

b)

Summary Introduction

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

c)

Summary Introduction

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

d)

Summary Introduction

To determine: Whether IRR changes with respect to change in cost of capital.

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Answer 4

Question

Chapter 10, Problem 4MC

a)

Summary Introduction

Case summary:

The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises.

Here are the net cash flows (in thousand $)

To determine: The definition of internal rate of return and the IRR of each franchise’s.

b)

Summary Introduction

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

c)

Summary Introduction

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

d)

Summary Introduction

To determine: Whether IRR changes with respect to change in cost of capital.

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Answer 5

Chapter 10, Problem 4MC

a)

Summary Introduction

Case summary:

The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises.

Here are the net cash flows (in thousand $)

To determine: The definition of internal rate of return and the IRR of each franchise’s.

b)

Summary Introduction

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

c)

Summary Introduction

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

d)

Summary Introduction

To determine: Whether IRR changes with respect to change in cost of capital.

Answer 6

Chapter 10, Problem 4MC

a)

Summary Introduction

Case summary:

The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises.

Here are the net cash flows (in thousand $)

To determine: The definition of internal rate of return and the IRR of each franchise’s.

Answer 7

Chapter 10, Problem 4MC

a)

Summary Introduction

Case summary:

The cash flows of Franchise L's would start off slowly however will rise rather quickly as people become much health-conscious, while the cash flows of Franchise S would start off high however will trail off as other chicken competitors comes inside the marketplace and as people become more health-conscious and avoid fried foods. Franchise L serves breakfast and lunch, whereas Franchise S serves only dinner, so it is possible for person X to invest in both franchises.

Here are the net cash flows (in thousand $)

To determine: The definition of internal rate of return and the IRR of each franchise’s.

Answer 8

b)

Summary Introduction

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

Answer 9

b)

Summary Introduction

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

Answer 10

c)

Summary Introduction

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

Answer 11

c)

Summary Introduction

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

Answer 12

d)

Summary Introduction

To determine: Whether IRR changes with respect to change in cost of capital.

Answer 13

d)

Summary Introduction

To determine: Whether IRR changes with respect to change in cost of capital.

Answer 14

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Ch. 10 - Define each of the following terms: Capital...Ch. 10 - What types of projects require the least detailed...Ch. 10 - Explain why the NPV of a relatively long-term...Ch. 10 - When two mutually exclusive projects are being...Ch. 10 - Suppose a firm is considering two mutually...Ch. 10 - A project has an initial cost of 40,000, expected...Ch. 10 - Refer to Problem 10-1. What is the project’s IRR? Ch. 10 - Refer to Problem 10-1. What is the projects MIRR?Ch. 10 - Prob. 4P Ch. 10 - Prob. 5P

Solution Summary: The author explains the internal rate of return and the IRR of each franchise.

To determine: The relationship between IRR and YTM and IRR if equal cash inflow of $40.

To determine: The logic behind the IRR method and the franchises should be accepted if they are independent and mutually exclusive.

To determine: Whether IRR changes with respect to change in cost of capital.

Chapter 10 Solutions