Answered step by step
Verified Expert Solution
Question
1 Approved Answer
I got 3.5 and 3.1 for the years Paul Swanson has an opportunity to acquire a franchise trom The Yogurt Place, Inc., to dispense frozen
I got 3.5 and 3.1 for the years
Paul Swanson has an opportunity to acquire a franchise trom The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: a. A sultable location in a large shopping mall can be rented for $4,400 per month. b. Remodeling and necessary equipment would cost $372,000. The equipment would have a 10-year life and an $37,200 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. C. Based on similar outets elsewhere, Mr. Swanson estimates that sales would total $470,000 per year. Ingredients would cost 20% of sales. d Operating costs would include $87,000 per year for salaries. S5,200 per year for insurance and $44.000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc of 12.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. SWANSON Contribution Format Income Statement ales S 470,000 Variable expernses Cosl of ingredienls 94,000 8 750 152,5D 317,250 Contribution margin Selling and administrative expenses Salaries Insurance tities Depreciation Rent 87,000 5,200 44 DDD 33,480 52,800 222,400 94,770 operating income 2a. Compute the simple rate of return promised by the outlet. (Round percentage answer to 1 decimal place, ie. 0.123 should be considered as 12.3%.) 25 51% 2b. If Mr. Swanson requires a simple rate of return of at least 18%, should he acquire the franchise? Yes No 3a. Compute the payback period on the outlet. (Round your answer to 1 decimal place.) ayback period years 3b. If Mr. Swanson wants a payback of two years or less, will he acquire the franchise? Yes NoStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started