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Ryan Huston's lifelong dream is to own a restaurant. He owns a premium site for a restaurant across the street from the local university. Now
Ryan Huston's lifelong dream is to own a restaurant. He owns a premium site for a restaurant across the street from the local university. Now he needs to decide what kind of restaurant to open. Recently, Ryan began to investigate one of the fastest-growing fast-food franchises in the country, Chuck's Chicken Shack. A Chuck's Chicken Shack franchise costs exist72,000, an amount that is amortized over 15 years. As a franchisee, Ryan would need to adhere to the company's building specifications. The building would cost an estimated exist1, 080,000 and would have a exist120,000 salvage value at the end of its 15-year life. The restaurant equipment (fryers, steam tables, booths, counters) is sold as a package by the corporate office at a cost of exist480,000, will have a salvage value of exist24,000 at the end of its five-year life, and must be replaced every five years. Ryan estimates the annual revenue from a Chuck's Chicken Shack franchise at exist2.280 000. Food costs typically run 36% of revenue Annual operating expenses, not including depreciation, total exist1, 020,000. For financial reporting purposes, Ryan will use straight-line depreciation and amortization. Based on past experience, he uses a 16% discount rate. (a) Calculate the restaurant's net present value over the franchise's 15-year life. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58, 971.) Net present value exist
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