A popular fast food restaurant, McTavish, famous for their Big T Burger, is trying to determine...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A popular fast food restaurant, McTavish, famous for their Big T Burger, is trying to determine the value of its franchise leasing model. Sales from a typical McTavish restaurant is $2,000,000 and sales is expected grow by 3% each year. Thus the sale in the first month is $2,000,000/12 = $166,666.67. Since McTavish owns or leases each restaurant's property, they typically pay $2400 month. As part of the franchise agreement, the franchisee must pay McTavish monthly rent in the amount of 8.5% of monthly sales. Given that McTavish's rent grows by 2% each year, determine the present value of a 5-year leasing agreement to McTavish. (30 points) ● Let McTavish's discount rate be 5%. Note - all calculations are monthly since rents are paid monthly Use the approximation where an annual growth rate of x grows at a rate of x/12 on a monthly basis. You must submit a printout of a well-documented spreadsheet for the 5-year analysis. ● A popular fast food restaurant, McTavish, famous for their Big T Burger, is trying to determine the value of its franchise leasing model. Sales from a typical McTavish restaurant is $2,000,000 and sales is expected grow by 3% each year. Thus the sale in the first month is $2,000,000/12 = $166,666.67. Since McTavish owns or leases each restaurant's property, they typically pay $2400 month. As part of the franchise agreement, the franchisee must pay McTavish monthly rent in the amount of 8.5% of monthly sales. Given that McTavish's rent grows by 2% each year, determine the present value of a 5-year leasing agreement to McTavish. (30 points) ● Let McTavish's discount rate be 5%. Note - all calculations are monthly since rents are paid monthly Use the approximation where an annual growth rate of x grows at a rate of x/12 on a monthly basis. You must submit a printout of a well-documented spreadsheet for the 5-year analysis. ●
Expert Answer:
Answer rating: 100% (QA)
I apologize but as a textbased AI Im unable to generate or provide a visual representation of a spreadsheet However I can help guide you through the c... View the full answer
Related Book For
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118644942
6th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
Posted Date:
Students also viewed these accounting questions
-
A Kirk Limited is trying to determine the value of its ending inventory as of February 28, 2012, the companys year-end. The accountant counted everything that was in the warehouse, as of February 28,...
-
Columbus Limited is trying to determine the value of its ending inventory at February 28, 2014, the company's year-end. The accountant counted everything that was in the warehouse as of February 28,...
-
Weber Limited is trying to determine the value of its ending inventory at February 28, 2014, the companys year-end. The accountant counted everything that was in the warehouse as of February 28,...
-
You are looking at buying a piece of real estate and you intend to borrow as much as you possibly can from a bank to buy the property. The bank you are dealing with has a requirement that the LVR for...
-
The Gruen Toy Company makes a variety of dolls at its operation in Munich. Its manufacturing process is highly automated. A recently installed ABC system has four activity centers: Two dolls are...
-
Find the optical power and the focal lengths (a) Of a thin glass lens in liquid with refractive index no = 1.7 if its optical power in air is Ф0 = 5.0 D; (b) Of a thin symmetrical biconvex...
-
Using an incremental internal rate of return (IRR) analysis, the decision to replace the "current best" by the "challenger"' is based on what decision rule? a. The internal rate of return of the...
-
Marty's Entrees produces frozen meals, which it sells for $ 9 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the...
-
Defend the following statement: Data and database administration are even more important in the decentralized IS environment than in the centralized one
-
At the end of its first year, the trial balance of Wolowitz Company shows Equipment $30,000 and zero balances in Accumulated DepreciationEquipment and Depreciation Expense. Depreciation for the year...
-
Minnie Smile, D.D.S. opened a dental practice on January 1, 201X. During the first month of operations, the following transactions occurred: paid 1 years rent in advance for $12,000. Collected $700...
-
Building codes generally apply to all existing buildings as well as new construction.
-
Manna Foods created single-serving portions of frozen vegetables to cater to the needs of customers in South Africa who lack proper refrigeration. This is an example of, a. determining whether there...
-
Racer, Inc. has asked you to prepare its bank reconciliation at the end of the current month. For the following item, please indicate how it would be reported on the reconciliation: Item: The bank...
-
9. ABC stock is currently trading at $880.30, and historically its volatility has been 15%. The risk-free rate of interest for any tenor is 1.5% compounded continuously. For this problem you will...
-
Many foods and beverages are flavored with substances synthesized by chemists and not sourced naturally. Do you consider the "natural and artificial " labels on items when you purchase? Should we...
-
Solve the equation. Check your solution(s). 1+= 21 2x+70-4
-
How has the too-big-to-fail policy been limited in the FDICIA legislation? How might limiting the too-big-to-fail policy help reduce the risk of a future banking crisis?
-
Buckingham Ltd. purchases a delivery truck on January 1, 2015, at a cost of $86,000. The truck is expected to have a residual value of $6,000 at the end of its four-year useful life. Buckingham has a...
-
Gildan Activewear Inc. reported the following selected financial information (all in U.S. $ millions): net sales of $1,948 in 2012, $1,726 in 2011, and $1,311 in 2010. The company also reported a...
-
Why are some events recorded as accounting transactions but others are not?
-
Using tha data file usmacro, estimate the ARDL \((2,1)\) model Your estimates should agree with the results given in equation (9.42). Use these estimates to verify the forecast results given in Table...
-
Using the data file usmacro, estimate the \(\operatorname{AR}(1)\) model \(G_{t}=\alpha+\phi G_{t-1}+v_{t}\). From these estimates and those obtained in Exercise 9.16, use the results from Exercise...
-
Consider the \(\operatorname{ARDL}(p, q)\) equation and the data in the file usmacro. For \(p=2\) and \(q=1\), results from the LM test for serially correlated errors were reported in Table 9.6 for...
Study smarter with the SolutionInn App