Paul Swanson has an opportunity to acqulre 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$.$ A sultable location In a large shopping mall can be rented for $$5,100$ per month.

b$.$ Remodelling and necessary equlpment would cost $$414,000.$ The equlpment would have a $15-$year life and a $$27,600$ salvage value. Stralght$-$line depreclation would be used, and the salvage value would be considered In computing depreclation.

c$.$ Based on similar outlets elsewhere, Mr$.$ Swanson estimates that sales would total $$540,000$ per year. Ingredients would cost $20\%$ of sales.

d$.$ Operating costs would Include $$94,000$ per year for salarles, $$5,900$ per year for insurance, and $$51,000$ per year for utilitles. In addlition, Mr$.$ Swanson would have to pay a commisslon to The Yogurt Place, Incorporated, of $16\mathrm{.}0\%$ of sales.

Required:

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 $19\%,$ should he acquire the franchise?

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

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

Complete this question by entering your answers in the tabs below.

Req $1$

Req$2A$

Req $28$

Req $3A$

Req $3B$

Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet.

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