Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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.

image text in transcribed

image text in transcribed

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 $3,960 per month. b. Remodelling and necessary equipment would cost $347,500. The equipment would have a 15 -year life and an $10,000 salvage value. Straight-line depreciation would be used. c. On the basis of similar outlets elsewhere, Swanson estimated that sales would total $312,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $68,000 per year for salaries, $6,000 per year for insurance, and $36,600 per year for utilities. In addition, Swanson would have to pay a commission to The Yogurt Place of 12.5% of sales. 2-a. Compute the simple rate of return promised by the outlet. (Round your answer to 2 decimal places. (i.e., 0.1234 should be considered as 12.34%) ) 2-b. If Swanson requires a simple rate of return of at least 6.0%, should he acquire the franchise? Yes No 3-a. Compute the payback period on the outlet. (Round your answer to 1 decimal place.) 3-b. If Swanson wants a payback of four years or less, will he acquire the franchise? Yes No

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Jane Doe

Authors: Michelle Cornish

1st Edition

1777418828, 978-1777418823

More Books

Students also viewed these Accounting questions