Decision-Making. A group of entrepreneurs is considering the purchase of a fast-food franchise. Franchise A predicts that it will bring in a constant revenue stream of $80,000 per year for 10 yr. Franchise B predicts that it will bring in a constant revenue stream of $95,000 per year for 8 yr. Based on a comparison of accumulated present values, which franchise is the better buy, assuming the interest rate is 4.1%, compounded continuously, and both franchises have the same purchase price?
Decision-Making. A group of entrepreneurs is considering the purchase of a fast-food franchise. Franchise A predicts that it will bring in a constant revenue stream of $80,000 per year for 10 yr. Franchise B predicts that it will bring in a constant revenue stream of $95,000 per year for 8 yr. Based on a comparison of accumulated present values, which franchise is the better buy, assuming the interest rate is 4.1%, compounded continuously, and both franchises have the same purchase price?
Solution Summary: The author calculates the better of the two Franchises to buy based on a comparison of accumulated present value.
Decision-Making. A group of entrepreneurs is considering the purchase of a fast-food franchise. Franchise A predicts that it will bring in a constant revenue stream of $80,000 per year for 10 yr. Franchise B predicts that it will bring in a constant revenue stream of $95,000 per year for 8 yr. Based on a comparison of accumulated present values, which franchise is the better buy, assuming the interest rate is 4.1%, compounded continuously, and both franchises have the same purchase price?
Elementary Statistics: Picturing the World (7th Edition)
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