Question
Kenneth Padilla is considering investing in a franchise that will require an initial outlay of $75,000. He conducted market research and found that after-tax cash
Kenneth Padilla is considering investing in a franchise that will require an initial outlay of $75,000. He conducted market research and found that after-tax cash flows on the investment should be about $20,000 per year for the next 9 years. The franchiser stated that Kenneth would generate a 20.1 percent return. Her cost of capital is 10.5 percent. Find the Net Present Value (NPV) for the project: (Do not round intermediate calculations, round final answer to two decimals, negative should be preceded by - i.e. -123.45)
Based on the NPV results you obtained in the previous question,is the franchise a good investment?Why or why not? Explain fully.
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