Herb e vore is considering investing in a salad stop

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13.Herb E. Vore is considering investing in a Salad Stop franchise that requires an initial outlay of $100,000. He conducted a market research and found that after-tax cash flows on this investment should be about $20,000 a year for the next 7 years. The franchiser states that Herb will generate a 20 percent rate of return. Herb currently has his money in a mutual fund, which has grown at an average annual rate of 10 percent. He tells the franchiser that money has a time value, and the actual rate of return according to his calculations is much less than 20 percent.a.Do you agree with the franchiser or with Herb?b.What rate of return is the franchiser using, and what method did Salad Stop use to calculate it? They used the simple interest method to figure the 20%c.What rate of return is Herb using, and what method did he use?d.Should Herb make the investment? Explain your answer.15.Buster’s boss stated that after reviewing first-quarter earnings, the company decided to invest in only one store in the city. After evaluating the performances of the store, the company will determine if it wants to increase its presence in the area.a.If you were Buster, what method of evaluation would you use to recommend a site for a new video store?b.Explain how you would determine which site to invest in.

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