Problem 1 -

3-IN-1 COFFEE COMPANY charges an initial franchise fee of P 900,000 to Mrs. Fely Nimfa for the right to operate as a franchisee of 3-IN-1 COFFEE COMPANY. Of this amount P 180,000 is payable when the agreement is signed and the balance is payable in 4 equal installment payments. In return for the payment of initial franchise fee, the franchisor will assist the franchisee to locate the site, supervise the construction activity and provide bookkeeping services. The credit rating of the franchisee indicates that the money can be borrowed at 10%. The present value of an ordinary annuity factor is 3.16987.

REQUIRED:

1. How much is the franchise revenue if the down payment is refundable, the collectability of the note is reasonably assured but the substantial services remain to be performed?

2. How much is the franchise revenue if the down payment is non-refundable, the collectability of the note is reasonably assured and there is substantial performance of services?

3. How much is the franchise revenue if the down payment is non-refundable, the collectability of the note is not reasonably assured and there is substantial performance of services?

4. How much is the franchise revenue if the down payment is non-refundable, the collectability of the note is not reasonably assured and there is substantial performance of services equivalent to the down payment?