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Joe Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc to dispense frozen yogus products under the name The Yogurt Place Swanson has assembled the following information relating to the franchise a. A suitable location in a large shopping mall can be rented for $5,180 per month b. Remodeling and necessary equipment would cost $302,500. The equipment would have a 15-year life and an $11,500 salvage value Straight-line depreciation would be used c On the basis of similar outlets elsewhere. Swanson estimated that sales would total $414,000 per year. Ingredients would cost 20% of sales d Operating costs would include $126,000 per year for salaries, $6.250 per year for insurance and $33,700 per year for utilities In addition, Swanson would have to pay a commission to The Yogurt Place of 12.5% of sales Required: 1. Prepare a contribution format income statement that shows the expected net operating Income each year from the franchise Outlet JOE SWANSON Income Statement Deduct: Operating expenses ved Help Save & Ext JOE SWANSON Income Statement Deduct: Operating expenses: Total operating expenses 2-a. Compute the simple rate of return promised by the outlet (Round your answer to 2 decimal places. (ie., 0.1234 should considered as 12.34%).) % Simple rate of return 2-b. If Swanson requires a simple rate of return of at least 75%, should he acquire the franchise? Yes O NO 3-a. Compute the payback period on the outlet. (Round your answer to 1 decimal place.) Payback period yoars 3-b. If Swanson wants a payback of four years or less, will he acquire the franchise? Yes

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