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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. A suitable location in a large shopping mall can be rented for $3,600 per month. b. Remodeling and necessary equipment would cost $324,000. The equipment would have a 15 -year life and a $21,600 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 $390,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $79,000 per year for salaries, $4,400 per year for insurance, and $36.000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.0% 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 24%, 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

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