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Complete fully Compute the simple rate of return promised by the outlet. (Round your answer to 1 decimal place.) If Mr. Swanson requires a simple
Complete fully
Compute the simple rate of return promised by the outlet. (Round your answer to 1 decimal place.) If Mr. Swanson requires a simple rate of return of at least 18%, should he acquire the franchise? Yes If Mr. Swanson wants a payback of three years or less, will he acquire the franchise? Compute the payback period on the outlet. (Round your answer to 1 decimal place.) \begin{tabular}{|l|l|l|} \hline \multicolumn{2}{|c|}{ The Yogurt Place, Incorporated } \\ \hline Contribution Format Income Statement \\ \hline Variable expenses: & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline Fixed expenses: & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline \end{tabular} Roq 1 Req 2A Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $3,100 per month. b. Remodeling and necessary equipment would cost $294,000. The equipment would have a 20 -year life and a $14,700 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $340,000 per year. Ingredients would cost 20% sales. d. Operating costs would include $74,000 per year for salaries, $3,900 per year for insurance, and $31,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 14.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. 2-a. Compute the simple rate of return promised by the outlet. 2.b. If Mr. Swanson requires a simple rate of return of at least 18%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 3.b. If Mr. Swanson wants a payback of three years or less, will he acquire the franchise? Complete this question by entering your answers in the tabs below Step by Step Solution
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