Joe Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place. Swanson has assembled the following information relating to the franchise:

a$.$ A suitable location in a large shopping mall can be rented for $$4,640$ per month.

b$.$ Remodelling and necessary equipment would cost $$339,000.$ The equipment would have a $15-$year life and an $$12,000$ salvage value. Straight$-$line depreciation would be used.

c$.$ On the basis of similar outlets elsewhere, Swanson estimated that sales would total $$348,000$ per year. Ingredients would cost $20\%$ of sales.

d$.$ Operating costs would include $$79,000$ per year for salaries, $$8,300$ per year for insurance, and $$30,200$ per year for utilities. In addition, Swanson would have to pay a commission to The Yogurt Place of $12\mathrm{.}5\%$ of sales.

Required:

Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet.

$\backslash$table$[[$JOE SWANSON,$],[,$Income Statement,$],[$Deduct: Operating expenses:,,$],[,,],[,,],[,,],[,,],[,,],[$Total operating expenses,,$],[,,]]$

$2-$a$.$ Compute the simple rate of return promised by the outlet. $($Round your answer to $2$ decimal places. $($i$.$e$.,0\mathrm{.}1234$ should be considered as $12\mathrm{.}34\%).)$

Simple rate of return

$\%$

$2-$b$.$ If Swanson requires a simple rate of return of at least $8\mathrm{.}0\%,$ should he acquire the franchise?

Yes

No

$3-$a$.$ Compute the payback period on the outlet. $($Round your answer to $1$ decimal place.$)$

Payback period

years

$3-$b$.$ If Swanson wants a payback of four years or less, will he acquire the franchise?

Yes

No