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Veggie Burger Boy sells franchises to individuals who want to start small in the sandwiches-for vegetarians' business and grow in net cash flow over
Veggie Burger Boy sells franchises to individuals who want to start small in the sandwiches-for vegetarians' business and grow in net cash flow over the years. A franchisee in Mississippi provided the $5000 up-froat money but did very poorly the first year. He was allowed to borrow at the end of his first year from the corporation's capital incentive fund with a promise to repay the loan in addition to the annual share that the corporation contractually receives from annual sales. The net cash flows from the corporation's perspective are shown below: Year 0 1 2 3 4 5 6 NCF, $ 5000 -10,100 500 2000 2000 2000 2000 (a) Plot the PW versus i graph and estimate the rate of return for this franchise. (b) Use the IRR function on a spreadsheet to find the corresponding return.
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