And the health conscious and not so health conscious

and the health conscious and not so health conscious crowds with the franchises directly
competing against one another.
Here are the projects' net cash flows (in thousands of dollars):
Expected Net Cash Flow
Year Franchise L Franchise S
0 ($100) ($100)
1 10 70
2 60 50
3 80 20
Depreciation, salvage values, net working capital requirements, and tax effects are all
included in these cash flows.
You also have made subjective risk assessments of each franchise, and concluded that
both franchises have risk characteristics that require a return of 10 percent. You must
now determine whether one or both of the projects should be accepted.

a. What is capital budgeting?
b. What is the difference between independent and mutually exclusive projects?
4 5
+ +
+ +
+ +
+ -
+ -
- -
Mini Case: 11 - 29

Mini Case: 11 - 30
c.