Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Guthrie s restaurant was started in 1 9 6 5 in Haleyville, Alabama, by Hal Guthrie. The restaurant began serving Chicken Fingers in 1 9
Guthries restaurant was started in in Haleyville, Alabama, by Hal Guthrie. The restaurant began
serving Chicken Fingers in In Hal and his oldest son Chris opened a Guthries in Auburn,
Alabama. Originally, Guthries had a large menu including hamburgers, steak sandwiches, and chicken
fingers. Soon after opening, however, the menu was limited to the overwhelmingly popular Chicken
Finger box. The Box includes chicken fingers, French fires, cole slaw, Texas toast, and Guthries
Signature Sauce. During the s The Guthrie family opened Guthries locations in several college
towns throughout the Southeast, including Athens, Georgia, Tallahassee, Florida, and Tuscaloosa,
Alabama. Hey also opened them in several towns. By the end of the s Guthries was a household
name throughout much of the Southeast.
Now, more than years since first opening, Guthries continues as a specialty restaurant with a limited
menu focusing on Fried Chicken Fingers. It is still a family business, but its franchise business is
steadily growing. As a result, people all over the US can now enjoy Guthries Golden Fried Chicken
Fingers.
You and your business partners are considering applying for a franchise. If approved, you expect startup
costs to be $ in equipment that is depreciable. You will use a year MARCUS method to
depreciate the $ equipment. Your plan is to start and operate the business for years at which
time you expect to sell the business for $ You expect to initially have working capital needs
of $ but these have additional needs by $ per year in the years. You expect sales in the
first year to be $ and that sales will grow by per year. You project annual fixed operating
expenses of $ in the first year. These fixed expenses will grow by $ per year. Your annual
variable operating expenses are expected to be of sales.
You expect to pay taxes of Assume your required return is Should you apply for a Guthries
Franchise? Prepare a report responding to the following prompts:
Prepare pro forma income statements and operating cash flow projections. Explain your pro
forma statements in your report.
Estimate the total cash flows for this opportunity. Explain your estimates in your report.
Estimate the opportunitys NPV Explain how you arrived at your NPV estimates in the report.
Consider what happens to cash flows and NPV if Sales are more than expected. What if
sales are less than expected? Discuss this analysis in your report.
What is your recommendation? Should you and your partners pursue this opportunity? Explain
your recommendation and provide your rationale
acctg complete this in excel, only acceptable form for answer
show the solutions and then an image of the equations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started