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

a.	A suitable location in a large shopping mall can be rented for $3,300 per month.
b.	Remodeling and necessary equipment would cost $306,000. The equipment would have a 15-year life and an $20,400 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 sales would total $360,000 per year. Ingredients would cost 20% of sales.
d.	Operating costs would include $76,000 per year for salaries, $4,100 per year for insurance, and $33,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 15.5% of sales.

Required 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. PAUL SWANSON Contribution Format Income Statement Variable expenses Selling and administrative expenses 2a. Compute the simple rate of return promised by the outlet. (Round percentage answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.) Simple rate of return 2b. If Mr. Swanson requires a simple rate of return of at least 17%, should he acquire the franchise? Yes O No 3a. Compute the payback period on the outlet. Round your answer to 1 decimal place Payback period years 3b. If Mr. Swanson wants a payback of three years or less, will he acquire the franchise? Yes O No