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

a$.$ A suitable location in a large shopping mall can be rented for $$4\mathrm{.}100$ per month.

b$.$ Remodeling and necessary equipment would cost $$354\mathrm{.}000.$ The equipment would have a $20-$year life and a $$17700$ salvage value. Straight$-$line depreciation would be used. and the salvage value would be considered in computing depreciation.

c$.$ Based on similar outlets elsewhere. Mr$.$ Swanson estimates sales would total $$440.000$ per year. Ingredients would cost $20\%$ of sales.

d$.$ Annual operating costs would include $$84\mathrm{.}000$ for salaries. $$4\mathrm{.}900$ for insurance. $$41\mathrm{.}000$ for utilities. and a commission paid to The Yogurt Place. Incorporated, of $14\mathrm{.}5\%$ of sales.

Required:

Prepare a contribution format income statement showing the expected net operating income each year from the franchise.

$2-$a$.$ Compute the simple rate of return promised by the franchise.

$2-$b$.$ If Mr$.$ Swanson requires a simple rate of return of at least $20\%,$ should he acquire the franchise?

$3-$a$.$ Compute the payback period on this investment.

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

Complete this question by entering your answers in the tabs below.

Required $1$

Required $2A$

Required $2$B

Required $3$ A

Required $3B$

Prepare a contribution format income statement showing the expected net operating income each year from the franchise.

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