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Author Question: After a trip to Bordeaux France you are considering opening a restaurant based on Restaurant ... (Read 37 times)

mp14

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After a trip to Bordeaux France you are considering opening a restaurant based on Restaurant L'Entrecote. You will offer a fixed menu of salad, steak and French fries. Your innovation is that you will use a bordelaise (red wine) sauce instead of a tarragon butter sauce. You plan to run the restaurant for two years and then retire. Start-up costs, to be incurred immediately, are $500,000. Start-up costs include kitchen equipment, kitchen supplies, renovations, furniture, fixtures, and the point-of-sales system.
Assume that all of those assets are classified as 5-year property. The assets can be sold for $150,000 after two years.
You expect 100 diners per night. The restaurant will be open for 300 nights per year. The average diner orders food with a menu price of $35 and beverages with a menu price of $15. Food costs are 34% of the menu price and beverage costs are 50% of the menu price.
The nightly wages are $2,160 (for the chef, 5 kitchen staff, a bartender, the Maitre d' and 10 wait staff). Municipal tax, rent, and utilities, are $41,400 per annum.
Assume that all revenues and operating expenses are received (paid) at the end of each year.
The small business tax rate is 20%. The cost of capital is 10%.
When the restaurant opens you will have to invest in an inventory of wine, beer and liquor costing $50,000. What are the operating cash flows at the end of Year 1? 

MACRS Depreciation Rates
Year3-Year5-Year
133.33%20.00%
244.45%32.00%

◦ $100,000
◦ $128,600
◦ $102,880
◦ $202,880
◦ $1,271,400


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Marked as best answer by mp14 on Apr 25, 2021

Danny Ewald

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mp14

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Reply 2 on: Apr 25, 2021
Excellent


mochi09

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

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