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 payback period and its meaning.

Question

Want to see the full answer?

Answer 1

Question

Chapter 12, Problem 9MC

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 payback period and its meaning.

2)

Summary Introduction

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

3)

Summary Introduction

To determine: The variance among the regular and discounted payback periods.

4)

Summary Introduction

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

What are some of Airbnb Legal Issues? How have Airbnb Resolved these Legal issues?WHat happened in the legal problem with Airbnb and Italy?

What are AIrbnb's Legal Foundations? What are Airbnb's Business Ethics? What are Airbnb's Corporate Social Responsibility?

Discuss in detail the differences between the Primary Markets versus the Secondary Markets, The Money Market versus the Capital Market AND the Spot Market versus the Futures Market. Additionally, discuss the various Interest Rate Determinants listed in your textbook (such as default-risk premium.....).

Answer 2

Question

Chapter 12, Problem 9MC

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 payback period and its meaning.

2)

Summary Introduction

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

3)

Summary Introduction

To determine: The variance among the regular and discounted payback periods.

4)

Summary Introduction

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 12, Problem 9MC

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 payback period and its meaning.

2)

Summary Introduction

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

3)

Summary Introduction

To determine: The variance among the regular and discounted payback periods.

4)

Summary Introduction

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 12, Problem 9MC

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 payback period and its meaning.

2)

Summary Introduction

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

3)

Summary Introduction

To determine: The variance among the regular and discounted payback periods.

4)

Summary Introduction

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 12, Problem 9MC

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 payback period and its meaning.

2)

Summary Introduction

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

3)

Summary Introduction

To determine: The variance among the regular and discounted payback periods.

4)

Summary Introduction

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Answer 6

Chapter 12, Problem 9MC

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 payback period and its meaning.

Answer 7

Chapter 12, Problem 9MC

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 payback period and its meaning.

Answer 8

2)

Summary Introduction

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

Answer 9

2)

Summary Introduction

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

Answer 10

3)

Summary Introduction

To determine: The variance among the regular and discounted payback periods.

Answer 11

3)

Summary Introduction

To determine: The variance among the regular and discounted payback periods.

Answer 12

4)

Summary Introduction

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Answer 13

4)

Summary Introduction

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 17

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 analyzes the payback period of franchise L and franchise S, and determines whether they are independent or mutually exclusive.

Concept explainers

To determine: The rationale for the payback period technique and the franchise or franchises must be accepted if the company’s supreme acceptable payback is 2 years and is both franchises are independent or mutually exclusive.

To determine: The variance among the regular and discounted payback periods.

To determine: The main demerit of discounted payback and the payback method of real usefulness in capital budgeting decisions.

Want to see the full answer?

Chapter 12 Solutions