Homework-HW - Chapter 10 Mini Case Cash Flows in thousends...

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Chapter 10 Mini Case Cash Flows: in thousends of USD Year Franchise L Franchise S 0 -100 -100 1 10 70 2 60 50 3 80 20 I=10% 10% Question a. What is Capital Budgeting?
b. What is the difference between independent and mutually exclusive projects?
c. 1. Define the term Net Present Value (NPV). What is each franchise's NPV
c. 2. What is the rationale behind the NPV method? According to NPV, which franchise or franchises should be accepted if they are independent? Mutually exclusive?
c. 3. Would the NPVs change if the cost of capital changed?
d. 1. Define the term internal rate of return (IRR). What is each franchise’s IRR?
3 80 60.11 20 15.03 IRR 18.13% IRR 23.56% d.

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