Question: Service For 50 000 they give you training and exclusive territorial
Service. For $50,000, they give you training and exclusive territorial rights. Equipment can be purchased through the home office for an additional $50,000, all of which will be straight-line depreciated. The home office estimates your territory can generate $100,000 in sales volume in the first year and that sales will grow 10% in each of the following 4 years, at which time you plan on selling the business for $50,000, after tax. From reading their brochures and talking to several other franchisees, you believe that costs, excluding depreciation, are about 60% of sales. You also know that the home office requires you to pay a 15% royalty on your gross sales revenue. Using a 30% tax rate and a 10% return requirement, how will this opportunity affect your personal wealth?
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