managerial accounting

a QUESTION 3 {2 marks! After being red from Trident Inc. your friend Sukhdeep was having a diicult time nding employment. He wished he had been a better student by attending all his classes and not cheating on his exams and learning activities. He knows that you have a strong work ethic and are a good business person as you obtained your EBA from Yorkville University and always behaved ethically throughout your studies. He wants to go into partnership with you by opening a franchise and asked you for help in performing an analysis. The opportunity involves a coffee shop franchise. Which will require a $650,000 buy in. Typical annual operating costs will be $200,000 (cash) and that the forecasted revenues will be $310,000 per year. The Franchisor demands a payment of 12% of Revenues for trademark and business model. You would like to earn at least 3% on this investment and will need to borrow the entire buy-in amount at an interest rate cost of 4%. You plan to conduct your analysis over a 15 year period and will not consider taxes at this time. may 1. Find the NPV and IRR of this investment, given the information above. 2. You are skeptical of Sukhdeep's revenue forecast of $310,000 per year. He did take Math in school and achieved a grade of 95%, however he never attended any classes and was only able to achieve this remarkable grade by plagiarizing from a classmate. You believe that a more realistic revenue forecast will he lower. lConduct a sensitivity analysis by nding the NPV and IRE {similar to Part 1 above} of this investment using $230,030 and $260,000 as the revenue forecast. 3. You believe that you can negotiate a lower payment to the franchisor and also think that if revenues are lower than $310,030 costs will decrease by $20,030. Repeat the same analysis as you did in Part 2 above (using $280,011) and $260,000 forecasted revmue) with annual operating costs of $130,000 and Franchise fee of 9%! of revenues 4. Discuss how the sensitivity analysis will a'ect your decision to buy the anchise. Why don't you have to recalculate the IRR if you change the desired {discount} interest rate