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

 

 A suitable location in a large shopping mall can be rented for $$7,600$ per month. 

 

 Remodeling and necessary equipment would cost $$330,000.$ The equipment would have a $15-$year life and an $$28,000$ salvage value. Straight$-$line depreciation would be used, and the salvage value would be considered in computing depreciation. 

 

 Based on similar outlets elsewhere, Mr$.$ Swanson estimates that sales would total $$670,000$ per year. Ingredients would cost $20\%$ of sales. 

 

 Operating costs would include $$56,000$ per year for salaries, $7$,500$ per year for insurance, and $$\mathrm{}47,000$ per year for utilities. In addition, Mr$.$ Swanson would have to pay a commission to The Yogurt Place, Incorporated, of $12\mathrm{.}5\%$ of sales. 

 

 

 

 $2-$b$.$ If Mr$.$ Swanson requires a simple rate of return of at least $1\mathrm{}5\%,$ should he acquire the franchise? 

 

$3-$a$.$ Compute the payback period on the outlet.

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