Assume that fast-food restaurants generally provide an ROI of 12%, but that such a restaurant near a college campus has an ROI of 15% because its relatively large volume of business generates an above-average tunover (sales/assets). The replacement value of the restaurant's plant and equipment is $600,000 If you were to invest that amount in a restaurant elsewhere in town, you could expect a 12% ROI. Required: a-1. Would you be willing to pay more than $600,000 for the restaurant near the campus? Yes a-2. What is the maximum price you would be willing to pay for the business? Maximum Price b. If you purchased the restaurant near the campus for $750,000 and the fair value of the assets you acquired was $600 000 identify the account along with ts balance that is used to record the additional amount paid over the fair value of the assets
Assume that fast-food restaurants generally provide an ROI of 12%, but that such a restaurant near a college campus has an ROI of 15% because its relatively large volume of business generates an above-average tunover (sales/assets). The replacement value of the restaurant's plant and equipment is $600,000 If you were to invest that amount in a restaurant elsewhere in town, you could expect a 12% ROI. Required: a-1. Would you be willing to pay more than $600,000 for the restaurant near the campus? Yes a-2. What is the maximum price you would be willing to pay for the business? Maximum Price b. If you purchased the restaurant near the campus for $750,000 and the fair value of the assets you acquired was $600 000 identify the account along with ts balance that is used to record the additional amount paid over the fair value of the assets
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Assume that fast-food restaurants generally provide an ROI of 12%, but that such a restaurant near a college
campus has an ROI of 15% because its relatively large volume of business generates an above-average
tunover (sales/assets). The replacement value of the restaurant's plant and equipment is $600,000 If you were
to invest that amount in a restaurant elsewhere in town, you could expect a 12% ROI.
Required:
a-1. Would you be willing to pay more than $600,000 for the restaurant near the campus?
Yes
a-2. What is the maximum price you would be willing to pay for the business?
Maximum Price
b. If you purchased the restaurant near the campus for $750,000 and the fair value of the assets you acquired
was $600 000 identify the account along with ts balance that is used to record the additional amount paid over
the fair value of the assets](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F61db92b2-d9f0-4551-8740-5f067823ee63%2F5cf5c0c7-c0c8-41f2-97ae-77f5e3a091bf%2Ff0kz1wx.jpeg&w=3840&q=75)
Transcribed Image Text:Assume that fast-food restaurants generally provide an ROI of 12%, but that such a restaurant near a college
campus has an ROI of 15% because its relatively large volume of business generates an above-average
tunover (sales/assets). The replacement value of the restaurant's plant and equipment is $600,000 If you were
to invest that amount in a restaurant elsewhere in town, you could expect a 12% ROI.
Required:
a-1. Would you be willing to pay more than $600,000 for the restaurant near the campus?
Yes
a-2. What is the maximum price you would be willing to pay for the business?
Maximum Price
b. If you purchased the restaurant near the campus for $750,000 and the fair value of the assets you acquired
was $600 000 identify the account along with ts balance that is used to record the additional amount paid over
the fair value of the assets
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