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Andrew is considering purchasing a franchise agreement to distribute electronic gadgets for ten years. The...

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Finance

Andrew is considering purchasing a franchise agreement to distribute electronic gadgets for ten years. The agreement requires an investment of $1,500,000 today, $950,000 one year from today, and $350,000 two years from today to establish the showroom. The franchise generated $550,000 in profits each year from the first year onwards, for ten years. At the end of the tenth year he anticipates that he can sell the furniture in his showroom for $20,000.

  1. Calculate the IRR (5 Marks) Show your work for this question
  2. Determine if he should proceed with the agreement if the cost of capital is 9% - Type your decision. (1 Mark)

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