On July 1, 2014, Seashore Company signed an agreement to operate as a franchisee for an initial
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Question:
On July 1, 2014, Seashore Company signed an agreement to operate as a franchisee for an
initial franchise fee of P6,000,000. On the same date, the entity paid P2,000,000 and agreed
to pay the balance in four equal annual payments of PI,000,000, beginning July 1, 2015. The
down payment is not refundable and no future services are required of the franchisor. The
entity can borrow at 14% for a loan of this type. Present and future value factors are as
follows:
Present value of 1 at 14% for 4 periods
0.59
Future amount of 1 at 14% for 4 periods
1.69
Present value of an ordinary annuity of 1 at 14% for 4 periods
2.91
What is the initial measurement of the franchise?
A. 4,360,000
B. 6,000,000
C. 4,910,000
D. 6,760,000
Posted Date: