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What is the acquisition cost of the franchise

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Reference no: EM132632910

Question - On January 1, 2015, Hart Company signed an agreement to operate as a franchisee of Ace Company for an initial franchise fee of P12,000,000.

The same date, Hart Company paid P4,000,000 and agreed to pay the balance in four equal annual payments of P2,000,000 beginning January 1, 2016.

Hart Company can borrow at 14% for a loan of this type. The present value factors at 14% are as follows:

PV of 1 at 14% for 4 periods 0.59

PV of ordinary annuity of 1 at 14% for 4 periods 2.91

Required - What is the acquisition cost of the franchise?

Reference no: EM132632910

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