What are the terminal year cash flows

Reference no: EM132082288

Question: After a trip to Bordeaux France you are considering opening a restaurant based on Restaurant L'Entrecote. You will offer a fixed menu of salad, steak and French fries. Your innovation is that you will use a bordelaise (red wine) sauce instead of a tarragon butter sauce. You plan to run the restaurant for two years and then retire. Start-up costs, to be incurred immediately, are $500,000. Start-up costs include kitchen equipment, kitchen supplies, renovations, furniture, fixtures, and the point-of-sales system. Assume that all of those assets are classified as 5-year property. The assets can be sold for $150,000 after two years.

You expect 100 diners per night. The restaurant will be open for 300 nights per year. The average diner orders food with a menu price of $35 and beverages with a menu price of $15. Food costs are 34% of the menu price and beverage costs are 50% of the menu price. The nightly wages are $2,160 (for the chef, 5 kitchen staff, a bartender, the Maitre d' and 10 wait staff). Municipal tax, rent, and utilities, are $41,400 per annum. Assume that all revenues and operating expenses are received (paid) at the end of each year. The small business tax rate is 20%. The cost of capital is 10%. When the restaurant opens you will have to invest in an inventory of wine, beer and liquor costing $50,000. What are the terminal year cash flows?

Reference no: EM132082288

Questions Cloud

What portion of the first monthly payment is principal : Trek Holidays Company signed a 7%, 10-year note for $151,000. The company paid an installment of $1, 900 for the first month.

Develop your understanding of definitions of democracy : Develop your understanding of definitions of democracy and political revolution, and provide key details about the contexts that these forms emerge from.

Complete the worksheet using given information : The trial balance columns of the worksheet for Dixon Company at June 30, 2017, are as follows. DIXON COMPANY Worksheet For the Month Ended June 30, 2017.

Our understanding of history and western civilization : How do our methods for dating and interpreting artifacts impact our understanding of history and Western civilization?

What are the terminal year cash flows : You expect 100 diners per night. The restaurant will be open for 300 nights per year. The average diner orders food with a menu price of $35 and beverages.

Why did the countries that triggered these event act the way : Do you think it was to build an empire? To use the military as a means of getting out of the Great Depression?

What is most that it will be willing to pay for investment : Tricorp Company is considering an investment that is expected to return $320,000 after four years. If Tricorp demands a 15% return.

The united states went through dramatic economic change : This transformation and some of the apparent abuses that developed led to an increased role of the government in regulating businesses and society.

Review problem on conversion costs : Travel Trails Inc. manufactures railway coaches and uses the FIFO method of process costing to record costs. The Work-in-Process Inventory of the Heating.

User Account

All Pages