Question

Can you solve for the following? Thanks!

have just inherited $300,000 and have decided to purchase at least one established franchise in the fast food industry or possibly the if ) Franchise L:Lsa's Soups, Salads, and the franchise in 3 ears and the forecast of how each franchise will do over the 3-year period Franchise I's cask Nows will shart off sowly but will increase rather quickly as people become more health while Pranchise S's cash fows will start off high but will eail off as other chicken competisors enser the marketplace and as people become more healh conscious and avoid fried foods. Pranchise t serves breakfast and lunch, while franchise S serves only dinner, so i is possiMle to nvest in bosk franchises You see these franchises as perfect complements to on anoher: you could atract both the lunch and dinner crowds and the heaith conucious and not so bealth concious crowds with the franchises directly competing agalnut one another Here are the projects'net cash Jlows (in chossands of dollars) Expected Net Cash Flows Yoar S100) 3100) 50 salvage valves, nef working capital requirements, and sar effects are all included in these cash lows You have made subjective risk assessment of each franchise, and concluded that bock . i rarkir hrve nk character stic, ahat require a return 10% You must now determine whether one or both of the projects should be accepted. 20. The NPV of franchise Lis 22. The NPV of franchise S is 223. The IRR of franchise L is 23The IRR of franchise S is 245. The MIRR ofL is 256 The MIRR is S is

Answer 1

As per rules I am answering the first 4 subparts of the question.

1: NPV of L = $18.78 thousand

2: NPV of S= $ 19.98 thousand

3: IRR of L = 18.13%

4: IRR of S= 23.56%

	Expected Cash flows
Year	L	S
0	-100	-100
1	10	70
2	60	50
3	80	20
NPV	18.78	19.98
IRR	18.13%	23.56%

WORKINGS