Bryan Bessner has invested $1,400,000 in a restaurant. All $1.4 million 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 up 76% of the revenue earned by the restaurant.

Fixed costs would be:

Salaries.....................$450,000

Insurance................... 35,000

License..................... 25,000

Utilities..................... 120,000

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

Part of Bryan's investment (included in the $1,400,000 mentioned above) in the restaurant came through a bank loan of $150,000, on which he will be paying 6% interest this year.

Q

Bryan is hoping to earn 35% 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)