Chapter 10 mini case_Zhigaung & Xixi - Chapter 10 mini case d(1 Define the term internal rate of return(IRR What is each franchises IRR IRR is the

Chapter 10 mini case_Zhigaung & Xixi - Chapter 10 mini case...

This preview shows page 1 - 3 out of 4 pages.

Chapter 10 mini case d. (1) Define the term internal rate of return (IRR). What is each franchise’s IRR? IRR is the discount rate that forces the PV of the inflows to equal the initial cost. The IRR is an estimate of the project’s rate of return, and it is comparable to the YTM on a bond. Year (t) Franchise S Franchise L 0 ($100) ($100) 1 70 10 2 50 60 3 20 80 Irr S = IRR( -100, 70, 50, 20) = 23.56% Irr L = IRR(-100, 10, 60, 80) = 18.13% (2) How is the IRR on a project related to the YTM on a bond? (3) What is the logic behind the IRR method? According to IRR, which franchises

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture