Maurice Tutor

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About Maurice Tutor

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Expertise:
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Algebra,Applied Sciences,Biology,Calculus,Chemistry,Economics,English,Essay writing,Geography,Geology,Health & Medical,Physics,Science Hide all
Teaching Since: May 2017
Last Sign in: 402 Weeks Ago, 4 Days Ago
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Education

  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

Experience

  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 25 Jul 2017 My Price 7.00

Internal Rate of Return

Net present value, Internal Rate of Return, Sensitivity Analysis Sally wants to purchase a Burgers-N-Fries franchise. She can buy one for $500,000. Burgers-N-Fries headquarters provides the following information:
Estimated annual cash revenues$280,000
Typical annual cash operating expenses $165,000
Sally will also have to pay Burgers-N-Fries a franchise fee of 10% of her revenues each year. Sally wants to earn at least 10% on the investment because she has to borrow the $500,000 at a cost of 6%. Use a 10-year window, and ignore taxes.
Required
1. Find the NPV and IRR of Sally’s investment. 
2. Sally is nervous about the revenue estimate provided by Burgers-N-Fries headquarters. Calculate the NPV and IRR under alternative annual revenue estimates of $260,000 and $240,000.
3. Sally estimates that if her revenues are lower, her costs will be lower as well. For each revised level of revenue used in requirement 2, recalculate NPV and IRR with a proportional decrease in annual operating expenses.
4. Suppose Sally also negotiates a lower franchise and has to pay Burgers-N-Fries only 8% of annual revenues. Redo the calculations in requirement 3.
5. Discuss how the sensitivity analysis will affect Sally’s decision to buy the franchise.

Answers

Maurice Tutor
(5)
Status NEW Posted 25 Jul 2017 12:07 AM My Price 7.00

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