Bryan Bessner has invested $1,400,000 in a small restaurant. He would like to see a 9% after-tax return on his investment this year. Bryan faces a personal tax rate of 36%. There are many costs involved in running a restaurant. Estimates indicate that variable costs will use up 63% of the revenue earned by the restaurant. Fixed costs would be: Salaries.....................$680,000 Insurance................... 43,000 License..................... 18,000 Utilities..................... 29,000 Advertising.................... 46,000 Also, depreciation on the theatre building itself would be 10% of the building’s $1,500,000 book value. Part of Bryan’s investment in the theatre was used to buy kitchen equipment this year, costing $180,000. This equipment depreciates by 15% per year. Part of Bryan’s investment in the theatre came through a bank loan of $240,000, on which he will be paying 6% interest this year. REQUIRED: a. Please calculate the total amount of revenue that this restaurant will need to earn this year, in order to meet all costs and allow for Bryan’s expected after-tax return. Show your work. (more space next page)
Bryan Bessner has invested $1,400,000 in a small restaurant. He would like to see a 9% after-tax
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