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Capital budgeting analysis mini case Your uncle just gave you $1,000,000 to do with as you please. You have decided that you would like to purchase at least one established franchise in the fast foods area, maybe two of profitable. The problem is that you have never been one to stay with any project for too long, so you figure that your time frame is five years. After five years you will tell off your investment and go on to something else You have narrowed your selection down to two choices: (1) Franchise L Lisa's Soups, Salads & Stuffs and (2) Franchise S: Sam's Fabulous Fried Chicken. The net cash flows shown below include the price you would receive for selling the franchise in year 5 and the forecast of how each franchise will do over the five-year period Franchise L serves breakfast and lunch, while franchise serves only dinner, so it is possible for you to invest in both franchises Here are the projects estimated tree cash flows in thousands of dollars) Expected Free Cash Flow Year Franchise L Franchise 0 151201 $1201 1 10 100 2 40 3 00 60 4 30 40 5 140 20 Amortization salvage values networking capital requirements and tax effects are all Included in these tree cash flowes You also have concluded that both franchises have risk characteristics that require a rotum of 10% (capital cost). You must now determine whether one or both of the projects should be accepted. a. What is each franchise's NPV According to the NPV decision rule, which project should be accepted if they are mutually exclusive i5 mark b. What is cach trinchise IRR? According to the IRR decision rule, which project should be acopted if they are independent 15 matic) What is the MIRR for Franchise L'Assume that the rivestment rate is also equal to 10 15 marks d What is the discounted payback period for Franchise S. 15 min 45 w Ttid ridi ILIISEL ridillist 0 ($120) ($120) 1 10 100 2 40 80 3 60 60 4 80 40 5 140 20 Amortization, salvage values, net working capital requ ments, and tax effects are all included in these free cash flows. You also have concluded that both franchises have risk characteristics that require a return of 10% (capital cost). You must now determine whether one or both of the projects should be accepted. a. What is each franchise's NPV? According to the NPV decision rule, which project should be accepted if they are mutually exclusive? (5 marks) b. What is each franchise's IRR? According to the IRR decision rule, which project should be accepted if they are independent? (5 marks) c. What is the MIRR for Franchise L? Assume that the reinvestment rate is also equal to 10%. (5 marks) d. What is the discounted payback period for Franchise S. 15 marks)