Question

You have been offered the opportunity to purchase a franchise of Sunshine Juice Stores.
You will have to pay $258,635 for the initial investment in the store and its equipment, plus
$30,000 per year for the lease payments and the franchise fee. The franchise contract obligates
you for 10 years. Operating costs for each year will be $225,000, and the expected
revenue is $298,000 a year. Your hurdle rate is 10%. Ignore income taxes.
Required:
1. Does this investment yield a satisfactory rate of return?
2. What qualitative factors might be considered?