Erica purchased a franchise agreement to distribute electronic gadgets for 6 years. The agreement cost $2,000,000 and he had to make investments of $825,000 for the first 2 years to set up his showroom. The franchise generated $1,050,000 in profits each year from the 1st year to 6 years afterwards. At the end of year 6, he sold the furniture in his showroom for $80,000.

 What is the Internal Rate of Return (IRR)? b. Should he have proceeded with this plan if his cost of capital was 17%?

Answer rating: 100% (QA)

To calculate the Internal Rate of Return IRR for Ericas investment in the franchise agreement and de... View the full answer