Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Paul Swanson has an opportunity to acquire e franchise from The Yogurt Place, incorporated, to dispense frozen yogurt products under The Yoguirt Place namo, Mr.
Paul Swanson has an opportunity to acquire e franchise from The Yogurt Place, incorporated, to dispense frozen yogurt products under The Yoguirt Place namo, Mr. Swanson has assembled the following information relating to the franchise: a A sutable location in a large shopping mall can be rented for $3,400 per month. b. Remodeling and necessary equipment would cost $312.000. The equipment would have a 20 year life and a $15,600 salvoge value. Straight-line depreciaton would be used, and the salvage value would be considered in computing depreclation c. Based on similar oultets elsewhere, Mi. Swanson estimates that sales would total $370.000 per year ingredients would cost 20% of sales: d Operating costs would include $77,000 per year for salaries, $4,200 per year for insurance and $34,000 per year for utilises. in addition. M. Swanson would have to pay a commission to The Yogurt Place, incorporated, of 11 058 of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating incame each year from the franchise outiet. 2a. Compute the simple rate of return promised by the outlet. 2.b. If Mr. Swanson requiros a simple rate of return of at least 22 s, should he acquire the franchise? 3. Compute the payback period on the outle: 3-b. If Mr Swanson wants o paybock of three years or less, will he acquire the franchise? Complete this question by entering your answers in the tabs below. Prepare a contribution format income statement that shows the expected net operoting income each vear from the franchise outket
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started