2. Given the proposed income statements and the pre-opening expenses, what would be the loan amount? What would be the monthly payments?

3. Given the information in Question 2, create a yearly cash budget for the new place for the first two (2) years.

The Case of the Pretty Messed-Up Restaurants House of Chin flourished undericed the difference. Slowly but surely, the customers melted away Linda's management. She changed the de- cor, and changed the menu to quick order items for faster lunch service. Within a Linda Thomas was born and raisein L Chicago. Her parents owned and operated cor, and changed the memiu a neighborhood restaurant which had four decades of success. Linda began working in grade school, and by high school, she would manage the restaurant on weekends for her parents. When she was 20, Linda married Jim, a graduate student. When they moved to Denver because of his new teach ing job, she opened an off-premise catering firm, which soon became a successful en- terprise. For more than five years he firm catered weddings, society balls, and other n Even though the sales slipped at Lazy Jones, the House of Chin was still going year she was breaking even, and by thestrong. Linda began to use those profts to help cover the operating costs of Lazy In January 1989, the restaurant next Jnes. After a while, Linda realized that r to House of Chin went up for sale House of Chin couldn't support both res- Linda knew the owners, Mr. and Mrs.taurants. She then began to spend money Jones, and she had admired their small on advertising to promote Lazy Jones. She sandwich shop. She knew they were forced offered free delivery, free sodas, coupons to sell because of his heart attack around on sandwiches, coupons on dessert, and Thanksgiving. Even now, after recuperat- drawings for free giveaways. Sales would ing, the Joneses told Linda that they wanted increase for the promotion but dropped to spend some peaceful years playing with after it ended. Eventually, desperate, Linda overhauled the menu and turned Lazy end of 1988 was making a modest profit spend some peaceful years playing with In 1987, Jim accepted a job at South- heir grandchildren. Linda was very interested in buyingJones into a vegetarian restaurant. ern Texas State University, located in Amarillo, Texas. Linda sold her Denver business for $55,000, and after her arrival began to look at job opportunities. She uickly found that most catering jobs were related to the University, and the University The vegetarian restaurant succeeded fferentby leaps and bounds. There was no place types of establishments; and therefore, they n Amarillo like it, and Linda couldn't keep weren't in competition with one another up with demand. With the profits, Linda She also thought that it would save her finally redecorated and renovated the res- the restaurant. She reasoned that Chinese food and a sandwich shop are two di time and energy to have the restaurants taurant. was required to use ARA Company for allnext to one another-talk about central izing operations! Finally, knowing of Mr. The New Space Linda soon heard of a small Chinese restaurant that was struggling. James Lee, the owner, had been in business for the two years, and had yet to make a profit. Almost on impulse, Linda offered him a In November of 1989, the Burger King restaurant next door moved to a space in The only problem was money. While he Student Commons on campus. The she had her profits, there was no way she store front remained vacant. Linda would could buy the restaurant concept outright. sten to the local gossip and hear rumors deal! She would invest S30,000 of her Offering the old restaurant up for collatera about a possible new tenant perhaps a proceeds from the Denver firm into the she borrowed $80,000 from the Federalrecord store, or a boutique. Around March, Jones' condition, she felt she could get a good price House of Chin Restaurant in exchange for First Bank to pay the Jones for the concept, an equal partnership. James Lee agreed,recipes and long-term lease. and almost immediately trouble broke out. Linda heard a disturbing rumor: RJ regional vegetarian restaurant, was looking While the restaurant had been doingat the spot. At some point the negotiations James and Linda never really worked wellwell, Linda realized that the Lazy Jones with the landlord fell through. Linda lis- together. He resented her know-all attitude,decor- dark walls and orange plastic ened for any hint of renegotiations, and and she thought he was only after hercais-was old and dated. She planned scared by the potential threat, Linda money. Within six months, the restauranton remodeling, but could not do so until was in danger of bankruptcy because ofshe had more profits. In order to get the strolled next door for a look. The old Burger King was much larger the owners' bickering. To solve the prob- ney, she began to slowly raise prices than either of her two restaurants. It seated lem, Linda used her remaining money to and decrease the portion size. Even though approximately 70 people, with a larger buy James out She was now the sole she did not make any changes in the reci- counter for service. Slowly an idea began pes, Lazy Jones long-time customers noto form. If Linda took over the site an The Case of the Pretty Messed-Up Restaurants House of Chin flourished undericed the difference. Slowly but surely, the customers melted away Linda's management. She changed the de- cor, and changed the menu to quick order items for faster lunch service. Within a Linda Thomas was born and raisein L Chicago. Her parents owned and operated cor, and changed the memiu a neighborhood restaurant which had four decades of success. Linda began working in grade school, and by high school, she would manage the restaurant on weekends for her parents. When she was 20, Linda married Jim, a graduate student. When they moved to Denver because of his new teach ing job, she opened an off-premise catering firm, which soon became a successful en- terprise. For more than five years he firm catered weddings, society balls, and other n Even though the sales slipped at Lazy Jones, the House of Chin was still going year she was breaking even, and by thestrong. Linda began to use those profts to help cover the operating costs of Lazy In January 1989, the restaurant next Jnes. After a while, Linda realized that r to House of Chin went up for sale House of Chin couldn't support both res- Linda knew the owners, Mr. and Mrs.taurants. She then began to spend money Jones, and she had admired their small on advertising to promote Lazy Jones. She sandwich shop. She knew they were forced offered free delivery, free sodas, coupons to sell because of his heart attack around on sandwiches, coupons on dessert, and Thanksgiving. Even now, after recuperat- drawings for free giveaways. Sales would ing, the Joneses told Linda that they wanted increase for the promotion but dropped to spend some peaceful years playing with after it ended. Eventually, desperate, Linda overhauled the menu and turned Lazy end of 1988 was making a modest profit spend some peaceful years playing with In 1987, Jim accepted a job at South- heir grandchildren. Linda was very interested in buyingJones into a vegetarian restaurant. ern Texas State University, located in Amarillo, Texas. Linda sold her Denver business for $55,000, and after her arrival began to look at job opportunities. She uickly found that most catering jobs were related to the University, and the University The vegetarian restaurant succeeded fferentby leaps and bounds. There was no place types of establishments; and therefore, they n Amarillo like it, and Linda couldn't keep weren't in competition with one another up with demand. With the profits, Linda She also thought that it would save her finally redecorated and renovated the res- the restaurant. She reasoned that Chinese food and a sandwich shop are two di time and energy to have the restaurants taurant. was required to use ARA Company for allnext to one another-talk about central izing operations! Finally, knowing of Mr. The New Space Linda soon heard of a small Chinese restaurant that was struggling. James Lee, the owner, had been in business for the two years, and had yet to make a profit. Almost on impulse, Linda offered him a In November of 1989, the Burger King restaurant next door moved to a space in The only problem was money. While he Student Commons on campus. The she had her profits, there was no way she store front remained vacant. Linda would could buy the restaurant concept outright. sten to the local gossip and hear rumors deal! She would invest S30,000 of her Offering the old restaurant up for collatera about a possible new tenant perhaps a proceeds from the Denver firm into the she borrowed $80,000 from the Federalrecord store, or a boutique. Around March, Jones' condition, she felt she could get a good price House of Chin Restaurant in exchange for First Bank to pay the Jones for the concept, an equal partnership. James Lee agreed,recipes and long-term lease. and almost immediately trouble broke out. Linda heard a disturbing rumor: RJ regional vegetarian restaurant, was looking While the restaurant had been doingat the spot. At some point the negotiations James and Linda never really worked wellwell, Linda realized that the Lazy Jones with the landlord fell through. Linda lis- together. He resented her know-all attitude,decor- dark walls and orange plastic ened for any hint of renegotiations, and and she thought he was only after hercais-was old and dated. She planned scared by the potential threat, Linda money. Within six months, the restauranton remodeling, but could not do so until was in danger of bankruptcy because ofshe had more profits. In order to get the strolled next door for a look. The old Burger King was much larger the owners' bickering. To solve the prob- ney, she began to slowly raise prices than either of her two restaurants. It seated lem, Linda used her remaining money to and decrease the portion size. Even though approximately 70 people, with a larger buy James out She was now the sole she did not make any changes in the reci- counter for service. Slowly an idea began pes, Lazy Jones long-time customers noto form. If Linda took over the site an