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I need some help with question 6, please anyone. Thank you!! Paul and Jane had the following annual income statement information: Paul and Jane are
I need some help with question 6, please anyone. Thank you!!
Paul and Jane had the following annual income statement information: Paul and Jane are looking into expanding their seating capacity as well as buying new equipment and furnishings. They are considering a 20 seat expansion at a cost of $30,000 and plan on using their own money. They anticipate the extra seats to generate an additional 15% of revenue. All elements of the expansion are estimated to have a 7 year useful life and will have no salvage value. Paul and Jane use the straight line method of depreciation. The expansion is expected to increase revenues by 15% above their current level. To accommodate the additional guests and increased business additional staff would need to be hired at an additional cost of $225 per week. Other operating costs will increase by $1, 800 for the year. Currently Paul and Jane pay taxes at a rate of 22%. Paul and Jane will only go ahead with the expansion if the after tax return on investment is above 25% in the first year. A) Should Paul and Jane make the investment in the expansion? 13) If they had an alternative of borrowing $15,000 at a 10% interest rate and only using $15,000 of their own funds, would the decision change? If, in a restaurant, food cost, labour cost, and other operating costs total 60%, and indirect costs including net income are $42,000, then sales revenue required to provide the desired net income will be: Total annual restaurant sales revenue is $754,000. Lunch turnover is 2.25 and there are 60 seats. Lunch is served 5 days a week and is 30% of total annual sales revenue. Lunch average check will be: Sales revenue in Period 1 is $100,000 and food cost is 40%. Sales revenue in Period 2 is $104,000 and food cost is 44%. The percent change in food cost percentage from Period 1 to Period 2 isStep by Step Solution
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