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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

Question

Want to see the full answer?

Answer 1

Question

Chapter 12, Problem 5MC

a)

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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

b)

Summary Introduction

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Please write proposal which needs On the basis of which you will be writing APR. Write review of at least one article on the study area (Not title) of your interest, which can be finance related study area. Go through the 1. Study area selection (Topic Selection) 2. Review of Literature and development of research of framework 3. Topic Selection 4. Further review of literature and refinement of research fraework 5. Problem definition and research question…

Let it denote the effective annual return achieved on an equity fund achieved between time (t-1) and time t. Annual log-returns on the fund, denoted by In(1+i̟²), are assumed to form a series of independent and identically distributed Normal random variables with parameters µ = 7% and σ = 10%. An investor has a liability of £20,000 payable at time 10. Calculate the amount of money that should be invested now so that the probability that the investor will be unable to meet the liability as it falls due is only 5%. Express your answer to the NEAREST INTEGER and do NOT include a "£" sign. Note: From standard Normal tables, we have (-1.645) = 0.05.

For this question, use this data: myFunc = function (x, y = 2) {z = 7 Z+x^2+y } What is the output of myFunc(2)? O 13. O An error, y is undefined. O Nothing, we have to assign it as a vari O 9.

Answer 2

Question

Chapter 12, Problem 5MC

a)

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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

b)

Summary Introduction

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 12, Problem 5MC

a)

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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

b)

Summary Introduction

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 12, Problem 5MC

a)

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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

b)

Summary Introduction

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 12, Problem 5MC

a)

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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

b)

Summary Introduction

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Answer 6

Chapter 12, Problem 5MC

a)

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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

Answer 7

Chapter 12, Problem 5MC

a)

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 NPV profiles for franchises L and S and the discount rate do the profiles cross.

Answer 8

b)

Summary Introduction

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Answer 9

b)

Summary Introduction

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

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 evaluates the NPV profiles for franchises L and S and determines whether they are independent and mutually exclusive.

Concept explainers

Videos

To determine: The franchise or franchises would be accepted when they are independent and mutually exclusive and whether the answer is accurate at any cost of capital fewer than 23.6%.

Want to see the full answer?

Chapter 12 Solutions