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A new restaurant is ready to open for business. It is estimated that the food cost (variable cost) will be 30% of sales, while the
A new restaurant is ready to open for business. It is estimated that the food cost (variable cost) will be 30% of sales, while the fixed cost will be $540,000 The first year's sales estimates are $1,500,000. The cost to start up this restaurant will be $2,000,000. Two financing alternatives are being considered: a. 50% equity financing and 50% debt at 9% or b. all equity financing. Common stock can be sold at $5 per share. A. Compute the operating Break-even point in dollars. B. Compute DOL C. Compute DFL and DCL for both financing plans.
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