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Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under The Yogurt Place name Me
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under The Yogurt Place name Me Swanson has assembled the following information relating to the franchise a A suitable location in a large shopping mall can be rented for $3,100 per month b. Remodeling and necessary equipment would cost $294.000. The equipment would have a 20-year life and a $14.700 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 that soles would total $340,000 per year. Ingredients would cost 20% of sales 4. Operating costs would include $74.000 per year for salaries, $3,900 per year for insurance, and $31.000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc. of 14.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet 2-a Compute the simple rate of return promised by the outlet 2-b, if Mr. Swanson requires a simple rate of return of at least 18%, should he acquire the franchise? 3-a Compute the payback period on the outlet 3-b. If Mr. Swanson wants a payback of three years or less, will he acquire the franchise
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