You are considering opening another restaurant in the food chain of Raising Cane

Question

You are considering opening another restaurant in the food chain of Raising Cane’s. The new restaurant will have annual revenue of $1,100,000 and operating expenses of $600,000. The annual depreciation and amortization for the assets used in the restaurant will equal $70,000. An annual capital expenditure of $20,000 will be required to offset wear-and-tear on the assets used in the restaurant, but no additions to working capital will be required. The marginal tax rate will be 40 percent. Calculate the incremental annual free cash flow for the project.

How do I set this problem up to answer it?

Explanation / Answer

Annual Revenue = $ 1,100,000 - $ 600,000(Operating Expences)= $ 500,000-$ 70,000(Dep)=$ 430,000-$ 20,000(cap exp)=$ 410,000-$ 164,000(40% tax)=$ 246,000+$ 70,000(dep) $ 316,000

Raising Cane's incremental cash flow= $ 316,000

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.