Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated,Formula: PayBack Period and Annual Net Cash Flowa. A suitable location in a large shopping mall can be rented for$3,300 per month.
b. Remodeling and necessary equipment wouldcost $306,000. The equipment would have a15-year lifeand a$20,400value. 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 thatsales would total $360,000 per year. Ingredients wsales.
d. Operating costs would include$76,000per year for salaries,$4,100 per year for insurance, and$33,000per year forIn addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of15.5%of sales