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Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to...

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Accounting

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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 a. $4,300 per month. b. Remodeling and necessary equipment would cost $366,000. The equipment would have a 20-year life and an $18,300 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 $460,000 per year. Ingredients would cost 20% of sales. d Operating costs would include $86,000 per year for salaries, $5,100 per year for insurance, and $43,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 12.0% of sales

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