Reference no: EM131101017
James Polk Hospital has currently unused space in its lobby. In three years, the space will be required for a planned expansion, but the hospital is considering uses of the space until then.
The hospital has decided that it wants to purchase at least one and maybe two fast food franchises, to take advantage of the high volume of patients and visitors that walks through the lobby all day long. The hospital plans to purchase the franchise(s), operate it for three years, and then close down. The hospital has narrowed its selection down to two choices:
Franchise L: Lisa's Soups, Salads, and Stuff
Franchise S: Sam's Wonderful Fried Chicken
The net cash flows shown below include the costs of closing down the franchises in year 3 and the forecast of how each franchise will do over the three-year period. Franchise L serves breakfast and lunch, while Franchise S serves only dinner, so it is possible for the hospital to invest in both franchises. The hospital believes these franchises are perfect complements to one another: the hospital could attract both the breakfast/lunch and dinner crowds and the health conscious and not so health conscious crowds without the franchises directly competing against one another. The corporate cost of capital is 10 percent.
Net cash flows
Year Franchise S Franchise L
0 -$100 $-100
1 $70 $10
2 $50 $60
3 $20 $80
a. Calculate each franchise's payback period, net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR).
b. Which project or projects should be accepted if they are independent? Which project should be accepted if they are mutually exclusive?
|
Company cost of common equity
: Javits & Sons' common stock currently trades at $24.00 a share. It is expected to pay an annual dividend of $2.50 a share at the end of the year (D1= $2.50), and the constant growth rate is 5% a year. What is the company's cost of common equity if..
|
|
What is the monthly payment amount
: You take out a mortgage in the amount of $200,000 for 30 years at a rate of 5.75%: a. What is the monthly payment amount? b. How much interest will you pay over 30 years?
|
|
Average annual rate of return
: You put $10,000 into a retirement plan. After 20 years you had $42,478.50. What is the average annual rate of return you earned on this saving plan?
|
|
Explore a stateor localsocial issue
: Choose a topic related to a problem you would like to address; ask a question about how to solve the problem. The question must start with the phrase, "What would it take to . . .?"
|
|
Franchise payback period-net present value
: Calculate each franchise's payback period, net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR).
|
|
Written assignment - summary and reflection
: Summarize and reflect on what you have learned and how you have or have not acquired the 13 MPH Foundational Competencies in this course. Provide examples from the work you have done in this course as evidence. Discuss how this course has or has n..
|
|
Price of a european put option on the stock
: When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 5%, the volatility is 20% and the time to maturity is 3 months which of the following is the price of a European put option on the stock
|
|
Differentiate between medicare levy
: Differentiate between Medicare levy and Medicare levy surcharge. How are the charges determined and are the charges payable by all types of taxpayers?
|
|
Concessionary fashion for age pension entitlement
: Should employment income be assessed in a concessionary fashion for age pension entitlement purposes to encourage ongoing worker participation? Why?
|