Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else. Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%. Here are the net cash flows (in thousand $) To determine: The normal and abnormal cash flows.

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Answer 1

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

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Answer 2

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Expert Solution & Answer

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Answer 3

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Answer 6

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

Answer 7

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

Answer 8

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

Answer 9

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

Answer 10

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Answer 11

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 12 - What types of projects require the least detailed...Ch. 12 - Prob. 3Q Ch. 12 - Prob. 4Q Ch. 12 - Prob. 5Q Ch. 12 - A project has an initial cost of 40,000, expected...Ch. 12 - IRR Refer to Problem 12-1. What is the projects...Ch. 12 - Prob. 3P Ch. 12 - Prob. 4P Ch. 12 - Prob. 5P Ch. 12 - Prob. 6P

Solution Summary: The author explains how Person X decided to buy a fast food franchise after his grandfather died. He evaluated the two alternatives and found that both have characteristics of risk and need rate of return of 10%.

To determine: The NPV, IRR and MIRR of project P.

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

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Chapter 12 Solutions