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Problem 7-19 (Algo) Simple Rate of Return; Payback Period (L07-1, LO7-6) Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc.,

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Problem 7-19 (Algo) Simple Rate of Return; Payback Period (L07-1, LO7-6) 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: a. A suitable location in a large shopping mall can be rented for $2.800 per month b. Remodeling and necessary equipment would cost $276,000. The equipment would have a 20-year life and a $13,800 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $310,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $71,000 per year for salaries, $3,600 per year for insurance, and $28,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 13.0% of sales. Required: 1. 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 15%, should he acquire the franchise? 3-a. Compute the payback period on the outlet 3-b. If Mr. Swanson wants a payback of three years or less, will he acquire the franchise? Complete this question by entering your answers in the tabs below R ! Req2A Reg 28 Req3A R Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet The Vanit Pince In

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