Required 1 | |||
Expected net operating income each year | Calculations | Yearly Amount | |
Revenue | $ 4,00,000.00 | ||
Less: Variable costs | |||
Ingredients 20% of sales | 400000*20% | $ 80,000.00 | |
Commissions | 400000*12.5% | $ 50,000.00 | $ 1,30,000.00 |
Contribution Margin | $ 2,70,000.00 | ||
Less: Fixed Costs | |||
Rent | 3700*12 | $ 44,400.00 | |
Depreciation | (330000-16500)/20 | $ 15,675.00 | |
Salaries | $ 80,000.00 | ||
Insurance | $ 4,500.00 | ||
Utilities | $ 37,000.00 | $ 1,81,575.00 | |
Net Income | $ 88,425.00 | ||
Required 2 (a) | |||
Simple rate of Retun= | Incremental accounting income/Initial investment | ||
= | 88425/330000 | 27% | |
Required 2 (b) | |||
Since simple rate of return is 27% which is higher than the expected return i.e. 20%, therefore he should acqure the franchise. | |||
Required 3 (a) | |||
Payback period | |||
Step 1 Computation of net annual cash inflow = | Net income + Depreciation = | 88425+15675 | |
$ 1,04,100.00 | |||
Step 2: Computation of investment: = | 330000 | ||
Step 3: Computation of payback period:= | Investment required for the project/Net annual cash inflow= | 330000/104100 | |
3.17 | |||
Years | |||
Required 3 (b) | |||
If Mr.Swanson expects a payback period of three years or less, then he should not go with this franchise because the payback period of this is 3.17 years which is more than 3 years. |
Confused on this one. Help? Paul Swanson has an opportunity to acquire a franchise from The...
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 suitable location in a large shopping mall can be rented for $4,300 per month. Remodeling and necessary equipment would cost $366,000. The equipment would have a 20-year life and a $18,300 salvage value. Straight-line depreciation would be used, and the salvage value would be...
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 suitable location in a large shopping mall can be rented for $3,100 per month. Remodeling and necessary equipment would cost $294,000. The equipment would have a 20-year life and a $14,700 salvage value. Straight-line depreciation would be used, and the salvage value would be...
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 suitable location in a large shopping mall can be rented for $3,500 per month. Remodeling and necessary equipment would cost $318,000. The equipment would have a 20-year life and a $15,900 salvage value. Straight-line depreciation would be used, and the salvage value would be...
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 suitable location in a large shopping mall can be rented for $3,500 per month. Remodeling and necessary equipment would cost $318,000. The equipment would have a 20-year life and a $15,900 salvage value. Straight-line depreciation would be used, and the salvage value would be...
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 suitable location in a large shopping mall can be rented for $5,100 per month. Remodeling and necessary equipment would cost $414,000. The equipment would have a 15-year life and a $27,600 salvage value. Straight-line depreciation would be used, and the salvage value would be...
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 suitable location in a large shopping mall can be rented for $3,600 per month. 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...
Paul Swanson has an opportunity to acquire a franchise from the yogurt Place. PLEASE SHOW ALL WORK... 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 suitable location in a large shopping mall can be rented for $4,800 per month. Remodeling and necessary equipment would cost $396,000. The equipment would have a 10-year...
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 $3,000 per month. b. Remodeling and necessary equipment would cost $288,000. The equipment would have a 15-year life and a $19,200 salvage value. Straight-line depreciation would be used, and the salvage value...
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 $3.900 per month b. Remodeling and necessary equipment would cost $342,000. The equipment would have a 15-year life and a $22,800 salvage value. Straight-line depreciation would be used, and the salvage value...
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 $3,500 per month b. Remodeling and necessary equipment would cost $270,000. The equipment would have a 15-year life and an $18,000 salvage value. Straight-line depreciation would be used, and the salvage value...