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

Which of the following is/are good reason(s) for leasing? I. Taxes may be cancelled by leasing II. Leasing may increase certain types of certainty that might increase the value of the firm. III. Transaction costs will cease to exist for a lease contract than for buying the asset IV. Leasing facilitates the management of the firm's cash flows. V. Leasing provides 100 percent financing whereas loans require an initial down payment. Select one: a. I and III only b. IV only c. III only d. I and IV only e. I, III, and IV only

Which of the following is/are good reason(s) for leasing? I. Taxes may be cancelled by leasing II. Leasing may increase certain types of certainty that might increase the value of the firm. II. buying the asset Transaction costs will cease to exist for a lease contract than for IV. Leasing facilitates the management of the firm's cash flows. V. Leasing provides 100 percent financing whereas loans require an initial down payment. Select one: O a. IV only O b. I and IV only Oc. I and II only O d. II only O e. I, II, and IV only

Which one of these statements related to discounted payback is correct? Discounted payback does not require a cutoff point. O ооо The discounted payback period increases as the discount rate decreases. Payback is a better method of analysis than discounted payback. Discounted payback is used more frequently in business than payback. Discounted payback is biased towards short-term projects.

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