while you were studying one of your relatives passed away

Question 38 (18 points) While you were studying, one of your relatives passed away and left you $1 million 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 (if profitable). After five years you will sell off your investment(s) and go on to something else. You have narrowed your selection down to two choices: Franchise L and Franchise S. 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 S serves only dinner, so it is possible for you to invest in both. Here are the projects' estimated free cash flows (in thousands of dollars): Expected Free Cash Flow Year Franchise L Franchise S 0 ($120) ($120) 1 10 100 2 40 80 3 60 60 4 80 40 5 140 20 Amortization, salvage values, net working capital requirements, 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(s) 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 regular payback period for Franchise L