On January 1, 2022, Black Mamba Company signed an agreement to operate as a franchise of Doug company for an initial franchise fee of P30,000,000. Of this amount, P10,000,000 was paid when the agreement was signed and the balance is payable in equal annual payment of P5,000,000 beginning December 31, 2022. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Black Mamba’s credit rating indicates that it can borrow money at 12% for loan of this type. How much is the cost of franchise? A. 30,000,000 B. 25,186,000
On January 1, 2022, Black Mamba Company signed an agreement to operate as a franchise of Doug company for an initial franchise fee of P30,000,000. Of this amount, P10,000,000 was paid when the agreement was signed and the balance is payable in equal annual payment of P5,000,000 beginning December 31, 2022. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Black Mamba’s credit rating indicates that it can borrow money at 12% for loan of this type. How much is the cost of franchise? A. 30,000,000 B. 25,186,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2022, Black Mamba Company signed an agreement to operate as a franchise of Doug company for an initial franchise fee of P30,000,000. Of this amount, P10,000,000 was paid when the agreement was signed and the balance is payable in equal annual payment of P5,000,000 beginning December 31, 2022. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Black Mamba’s credit rating indicates that it can borrow money at 12% for loan of this type. How much is the cost of franchise?
A. 30,000,000
B. 25,186,000
C. 21,541,500
D. 19,065,000
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