A In-and-Out Burger restaurant owner is considering expanding into another urban

Question

A In-and-Out Burger restaurant owner is considering expanding into another urban area.

The expansion project will be financed through a line of credit with First National Bank.

The administrative costs of obtaining the line of credit are $500, and the interest payments are expected to be $1,000 per month.

The new restaurant will occupy an existing building that can be rented for $2500.

The incremental cash follows for the new restaurant include: Which of these are best choice

A. $400 administrative costs, $1,000 per month interest payments, $2,500
B. $1,000 per month interest payments, $2,500 per month rent.
C. $500 administrative administrative costs, $2,500 per month rent
D. $2,500 per month rent.


Explain how did you get that answer!

Explanation / Answer

C. $500 administrative administrative costs, $2,500 per month rent Reason - interest expenses are not included in the incremental cash flow analysis

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