Question
F Inc. granted a franchise to H. The franchisee was to pay a franchise fee of $250,000 payable in 5 equal annual installments starting with
F Inc. granted a franchise to H. The franchisee was to pay a franchise fee of $250,000 payable in 5 equal annual installments starting with the payment upon signing of the agreement. The franchise was to pay monthly 3% of fross sales of the preceeding month. Should the operations of the outlet prove unprofitable, the franchise may be cancelled with whatever obligations owing F Inc. in connetions with the $250,000 franchise fee waived. The prevailing interest rate is 14%. The first year generated gross sales of $1,250,000. What is the amount of unearned franchise fee after the first year of operations?
The answer is supposed to be $145,700 but I don't know how to solve for it.
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