What is the acquisition cost of the franchise

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Reference no: EM132673673

Problem 1: At the beginning of current year, Christine Company signed an agreement to operate as a franchise of Ace Company for an initial franchise fee of $12,000. Christine Company paid $4,000 down and agreed to pay the balance in four equal annual payments of $2,000 at the end of each year. Christine Company can borrow at 14% for a loan of this type. The present value factors at 14% are as follows: Present value of 1 at 14% for four periods = 0.59; Present value of an ordinary annuity of 1 at 14% for four periods = 2.91. What is the acquisition cost of the franchise?

Reference no: EM132673673

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