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Unformatted text preview: Lissette Espinoza Akbar Bhojani Taeho Park Soi Long, Kuan Kevin Steward Based on the Subway Restaurant data I provided complete the following financial analysis utilizing excel spre For Each Size Restaurant Calculate: 1. Future Sales Forecast Per Hero 3. Calculate Depreciation for Building and Equipment. 4. Calculate the projected Net Cash Flow, including termination cash flows for: Year 1-5 5. For Each year and store size calculate Break Even in unit and dollars 6. For Each year and store size calculate Degree of Operating Leverage 7. For Each year and store size calculate Degree of Financial Leverage 8. Calculate the Payback Method 9. Calculate the Net Present Value 10. Calculate the Internal Rate of Return 11. Write a 500 or greater word analysis Using a "memo format" describing which size restaurant is the best in List and explain the advantages and drawbacks of each capital budgeting method. Also include other risks in you feel you would need to be compensated for owning a subway. MEMO Format To Mr. Nugent From Team 4 Subject Best Investment Decision Date 6-May-08 2. Create a sales forecast for Year 1 and then grow the units by the Growth rate in units sold 3% for year Based on our analysis of the three subway restaurants, we arrived to t he conclus the best investm ent choice. We arrived to this conclusion by using t he Net Present V Return (IRR), and t he payback m et hod, which helped us conclude whether a project NPV of the sm all store is $48496, the NPV of the Moderat e store is $316,503, and t he 83475. The IRR of the sm all store is 16.94%, t he IRR of the Moderate store is 45.1%, The Payback m ethod for t he sm all st ore is 3.76%, the payback m ethod for the m ode large st ore it is greater than 5 years. As you can see from the inform ation above, t he m oderate store had the highest N m ethod, and the highest IRR. This m eans that the m edium store will be the m ost suc larger the IRR and NPV is, the m ore successful our store will be. A high value of NPV the m edium size SUBWAY will exceeds the firm s required rate of ret urn. When using will choose a project that would have an IRR that is equal or great er than the rate of If we were debating which store to go with and the IRR and NPV were in conflict , the that generat ed the highest NPV. The higher NPV would be chosen because it shows t would be added to the firm . The IRR, on t he other hand, shows percentage and does change in t he firm s value. The advantages of the internal rate of return m ethod, is involved and it considers tim e value of m oney. It also describes projects in term s of t which m akes it easy to com pare them with other invest m ents. The drawbacks of NPV value instead of percentage was not be used to com pare with other invest m ents....
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