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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.
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 $3,500 per month b. Remodelling and necessary equipment would cost $270,000. The equipment would have a 15-year life and an $18,000 salvage value. Straight-line depreciation would be used c. On the basis of similar outlets elsewhere, Swanson estimated that sales would total $300,000 per year. Ingredients would cost 20% of sales d. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and $27,000 per year for utilities. In addition, Swanson would have to pay a commission to The Yogurt Place 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 Answer is complete and correct. JOE SWANSON Income Statement Sales revenue $ 300,000 Deduct: Operating expenses Rent 42,000 Ingredients 60,000 Depreciation 16,800 Operating costs 100,500 Commission 37,500 Total operating expenses Net income 256,800 $ 43,200 2-a. Compute the simple rate of return promised by the outlet. (Round your answer to 2 decimal places. (ie., 0.1234 should be considered as 12.34%).) > Answer is complete but not entirely correct. Simple rate of 23.00 % return
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