Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

6. The restaurant owner is planning to expand his business with a license to a terrace on the street with ten tables. For this, he

6. The restaurant owner is planning to expand his business with a license to a terrace on the street with ten tables. For this, he has already hired a consultant, whom he must pay 340, to make sure he is informed of all the steps needed to be undertaken in the town hall to get the operating license for the next 5 years. The furniture would cost 4,000 and it would be necessary to hire a bartender to serve the terrace with an annual gross salary, including costs of social security and insurance, of 18,000 and an additional cook with a gross annual salary of 20,000. Each of the tables that the restaurant already has generates a monthly net income of 600, but the terrace tables are expected to generate 25% less since they cannot be used in bad weather. If the annual license for each table costs 1,000 and the cost of capital for the business is 12%, should the owner set up the terrace?

a) Yes, since the NPV is 17,628.65

b) Yes, since the NPV is 20,987.55

c) No, since the NPV is 3,457.23

d) None of the above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Populists Plungers And Progressives

Authors: Cedric B. Cowing

1st Edition

0691621993, 978-0691621999

More Books

Students also viewed these Finance questions

Question

Why do most breakthrough innovations occur in smaller firms?

Answered: 1 week ago