Bryan Bessner has invested $1,500,000 in a restaurant. All of this should be considered his investment. He would like to see a 10% after-tax return on his investment this year. Bryan faces a personal tax rate of 35%.

There are many costs involved in running a restaurant. Estimates indicate that variable costs will use 78% of the revenue earned by the restaurant.

Fixed costs would be:

Salaries$480,000

Insurance. 35,000

License 25,000

Utilities 140,000

Also, depreciation on the restaurant building itself would be 10% of the buildings $900,000 current book value.

Part of Bryans investment (included in the $1,500,000 mentioned above) in the restaurant came through a bank loan of $200,000, on which he will be paying 8% interest this year.

REQUIRED:

Please calculate the total amount of revenue that this restaurant will need to earn this year, in order to meet all costs and allow for Bryans expected after-tax return. (18 marks)

Bryan is hoping to earn 30% of his revenue from lunches, and the rest of it from dinners. Please calculate how much revenue Bryan is expecting to earn from each meal period. (7 marks)