Case summary:
Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.
Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs
Here are the net cash flows (in thousand $)
To determine: The profitability index (PI) of each franchises and the definition of PI.
Want to see the full answer?
Check out a sample textbook solutionChapter 12 Solutions
Intermediate Financial Management (MindTap Course List)
- What is the calculation for 'Profit Margin' for the firm in that picture?arrow_forwardHow do you identify and record key profitability ratios, including ROE for a company like Walmart?arrow_forwardwhat is the benchmark profitability ratio for the telecom industry? please attach a reference.arrow_forward
- How may analyzing sales and receivables provide information about a firms profitability?arrow_forwardHow might service industries predict revenue?arrow_forwardUse a pie chart to illustrate the sources that comprise a hypothetical companys total value. Using another pie chart, show the claims on a companys value. How is equity a residual claim?arrow_forward
- Choose a company and explain how a specific issue, policy, or procedure (for example, granting merchandise returns, establishing sales prices) might look if the business is structured as a decentralized business.arrow_forwardWhich of the following considers both time value and risk factor of the business concern? a. Sales Maximization b. Asset Maximization c. Profit Maximization d. Wealth Maximizationarrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College