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Assignment on Financial Viability of Wonder Kidz Franchise
Financial Management (ACCT 702) Shirley Lamarre
August 06, 2023
1
Title: Financial Viability of Wonder Kidz Franchise: A Path to Success
Introduction:
Mr. Bansal's aspiration of establishing a Wonder Kidz franchise has presented a promising entrepreneurial opportunity. As a team of financial consultants, we have meticulously evaluated the project's financial feasibility using capital budgeting techniques. Our analysis, including Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, Discounted Payback Period, and Profitability
Index (PI), aims to determine the project's viability and provide a recommendation for Mr. Bansal. Our evaluation is based on the cash flow projections provided in the case study and a discount rate of 12%, which represents the opportunity cost of capital.
Evaluation of Financial Viability:
1. Net Present Value (NPV):
The net present value (NPV) of the franchise venture is calculated to be 39,031.42
INR, which means it has a positive value. If the NPV is positive, it means that the project will bring in more money in the future than what Mr. Bansal initially invested. This is good news because it means the project will create value for him.
This indicates that the Wonder Kidz franchise has the potential to be profitable and successful. 2. Internal Rate of Return (IRR):
The project's internal rate of return (IRR) is 13.95%, which is higher than the cost of capital (12%). If the IRR (Internal Rate of Return) is higher than the required rate of return, it means that the franchise venture is expected to make a greater profit than the cost of the investment. This makes it a good opportunity to invest in. 3. Payback Period:
2
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Profit Streams for Projects A and B
period
?? ($)
?? ($)
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200,000
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Present value of Cash Inflows ($)
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Complete this question by entering your answers in the tabs below.
Required A
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FI
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Project A
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Required B
W
F2
#
Required C
3
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11
80
F3
$
4
m tv
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&
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Project B
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Y U
il A
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Project C
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FB
DD
(
F9
9
FU
O
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I. Create a structural organization of your team. Choose any of the exampled structu
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II. Select the most profitable project, using required rate of return of 15%
- Project A
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Cash fiow for the next 3 years = 25,000
Project B
Initial Investment = 100,000
Cash flow for the next 4 years = 31,250
- Project C
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Cash flow for the next 5 years = 35,000
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