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.

Question

What is the duration of a four-year Treasury bond with a 10 percent semiannual coupon selling at par?

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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What is the duration of a four-year Treasury bond with a 10 percent semiannual coupon selling at par?

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You bought a bond five years ago for $935 per bond. The bond is now selling for $980. It also paid $75 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond. I want to learn how to solve this on my financial calculator. Can you show me how to solve it through there.

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