You are considering opening a restaurant with 30 seats. You plan to open every day. You...

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You are considering opening a restaurant with 30 seats. You plan to open every day. You have $60,000 to invest and are in a 25% tax bracket. You want an after-tax return on your investment of 15%. You have researched this idea and come up with the following expenses: Management salary Depreciation Insurance Utilities Food expense Other expenses Interest on loans $40,000 15% on equipment (cost: $8,000) 25% on furniture (cost $7,000) $1,350 $330 per month 34% 8% 9% on a balance of $35,000 $2,400 $2,700 32% Maintenance Licenses Wage expense You expect that the seats will turn over 1.5 times per day. 4 Required: 1. Calculate the annual revenue required to earn the desired profit. 2. Calculate the average check at this level (in #1 above). 3. Calculate the annual revenue required to break-even. You are considering opening a restaurant with 30 seats. You plan to open every day. You have $60,000 to invest and are in a 25% tax bracket. You want an after-tax return on your investment of 15%. You have researched this idea and come up with the following expenses: Management salary Depreciation Insurance Utilities Food expense Other expenses Interest on loans $40,000 15% on equipment (cost: $8,000) 25% on furniture (cost $7,000) $1,350 $330 per month 34% 8% 9% on a balance of $35,000 $2,400 $2,700 32% Maintenance Licenses Wage expense You expect that the seats will turn over 1.5 times per day. 4 Required: 1. Calculate the annual revenue required to earn the desired profit. 2. Calculate the average check at this level (in #1 above). 3. Calculate the annual revenue required to break-even.

Answer rating: 100% (QA)

SOLUTION 1 Calculate the annual revenue required to earn the desired profit The desired profit is 15 of the initial investment of 60000 which is 9000 ... View the full answer