Fish Taco Company (FTC) is planning to open a taco store near new university campus housing. FTC estimates that the current neighborhood’s fast-food market is $200,000 per year, which will double when the new housing is occupied next year. FTC expects to capture 25 percent of the total neighborhood market unless MacBurger also opens a new store in the area. In that case, FTC expects to gain only 10 percent of the market. FTC’s gross margin ratio is 30 percent.

Required

a. Compute FTC’s forecasted gross margin for next year without a major competitor.

b. Compute FTC’s forecasted gross margin for next year with a major competitor