Expected Net Cash Flows Year Franchise L Franchise S 0 -$100 - $100 1 10 70 2 60 50 3 80 20 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%. You must now determine whether one or both of the franchises should be accepted. 1. Draw NPV profiles for Franchises L and S. At what discount rate do the profiles cross? 2. Look at your NPV profile graph without referring to the actual NPVs and IRRs. Which franchise or franchises should be accepted if they are independent? Mutually exclusive? Explain. Are your answers correct at any cost of capital less than 23.6%?