expected net cash flow
year	franchise L	franchise S
0	-100	-100
1	10	70
2	60	50
3	80	20

1)What is each franchises NPV?

2)According to NPV, which franchise or franchises should be accepted if they are independent? Mutually exclusive?

3)Would the NPVs change if the cost of capital changed?

Define the term internal rate of return (IRR). What is each franchises IRR?

(2) How is the IRR on a project related to the YTM on a bond?

(3) What is the logic behind the IRR method? According to IRR, which franchises

should be accepted if they are independent? Mutually exclusive?

(4) Would the franchises IRRs change if the cost of capital changed?