A restaurant has annual sales revenue of $600,000. Food cost of sales of is 40% of sales revenue and other operating expenses total $288,000 per year. The owner is considering an adjoining property to increase sales revenue and net income (after tax). Cost to lease the property is $12,500 per year on a 10-year lease, which must be paid in advance. New fumiture and equipment would have to be purchased, costing $50,000. Both the furniture and equipment will have a 10-year life, and no residual values. Inventory would increase by $2,500 and the cost of sales percentage will remain the same. Operating expenses will increase by $30,000 per year and the tax rate to be used is 28% of operating income. The expansion is expected to increase sales revenue by 20% of the P4.2 current level. a. Assume 100% equity financing for the expansion. Should the owner use equity financing if an 8% minimum return on the equity investment is required. Base your recommendation to the owner based on the expected first year of operations following the expansion. Proposed Alternative 2$ Present Situation %24 (1) Increase in net income: (2) Investment required: (3) Return on investment: (4) Based on a minimum 8% wanted, make the investment: Yes or No? Would your decision change if 20% of the expansion cost was covered by debt financing at a 10% interest rate? Explain your answer below: b