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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. Mr.

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:

  1. A suitable location in a large shopping mall can be rented for $4,100 per month.
  2. Remodeling and necessary equipment would cost $354,000. The equipment would have a 20-year life and a $17,700 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation.
  3. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $440,000 per year. Ingredients would cost 20% of sales.
  4. Operating costs would include $84,000 per year for salaries, $4,900 per year for insurance, and $41,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 14.5% of sales.

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Req 1 Req 2A Reg 2B Req Reg 3B Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. The Yogurt Place, Inc., Contribution Format Income Statement Variable expenses: Fixed expenses: Compute the simple rate of return promised by the outlet. (Round percentage answer to 1 decimal place.) Simple rate of return Req 1 Reg 2A Reg 2B Reg 3A Reg 3B Compute the payback period on the outlet. (Round your answer to 1 decimal place.) Payback period years

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