Assume that a national restaurant firm called BBQ builds 12 new restaurants at a

Question

Assume that a national restaurant firm called BBQ builds 12 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $400,000 of equipment and furnishings. To help partially defray the cost of this expansion, BBQ issues and sells 240,000 shares of stock at $40 per share.

Round answer to one decimal place

a. What is the ammount of economic investment that has resulted from BBQ's actions? $______ Million   

b. How much purely financial investment took place? $______Million

Explanation / Answer

a) The nature of economic investment is in the form of fixed expenses incurred on building restaurants. This amounts to 1*12 or $12 million on building and $12*400,000 = $4.8 million on furnishing. Hence the economic investment in total amounts of $16.8 million, a sum of construction and furnishing of all the 12 restaurants.

b) Financial investment is the public issue of shares which is 240,000*40 or $9.6 million.

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