(b)

Jonathan Lark's lifelong dream is to own a restaurant. He owns a premium site for a restaurant across the street from the local university. Now he needs to decide what kind of restaurant to open. Recently, Jonathan began to investigate one of the fastest-growing fast-food franchises in the country, Pepper Roni Pizza. A Pepper Roni Pizza franchise costs $42,600, an amount that is amortized over 15 years. As a franchisee, Jonathan would need to adhere to the company's building specifications. The building would cost an estimated $639,000 and would have a $71,000 salvage value at the end of its 15-year life. The restaurant equipment (fryers, steam tables, booths, counters) is sold as a package by the corporate office at a cost of $200,000, will have a salvage value of $14,200 at the end of its five-year life, and must be replaced every five years. Jonathan estimates the annual revenue from a Pepper Roni Pizza franchise at $1,349,000. Food costs typically run 36% of revenue. Annual operating expenses, not including depreciation, total $603,500. For financial reporting purposes, Jonathan will use straight- tine depreciation and amortization. Based on past experience, he uses an 16% discount rate. Click here to view the factor table. Your answer is correct. Calculate the restaurant's net present value over the franchise's 15-year life. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, eg. 58,971) Net present value $ 445,862 e Textbook and Media Attempts: 1 of 3 used (b) Use Excel or a similar spreadsheet application to calculate the restaurant's internal rate of return over the franchise's 15-year life. (Round answer to 2 decimal places, eg, 15.25%) Internal rate of return