How much is the cost of franchise

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On January 1, 2009, Calamba Company signed an agreement to operate as a franchisee of Bay 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, 2009. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Calamba's credit rating indicates that it can borrow money at 12% for a loan of this type.

Problem 1: How much is the cost of franchise?

a. P30,000,000

b. P21,541,500

c. P25,186,500

d. P19,065,000

Reference no: EM132864612

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