70.2K

Verified Solution

Link Copied!

please help its urgent, will surely upvote

L MCD2150 Accounting for Managers Week 11 Student Activity JJ Asian Cuisine has been in the business for a while. They started selling Shanghai Hand pull noodles and Lamb Cumin. The business is going well with a very healthy cash flow. After Cons retirement, Jason and James have now been forced to make the following consideration. option 1; opening an actual shop front. (Investment life 10 years) They will continue selling frozen foods to supermarkets, local markets and directly online but they also want to utilise their brand name serving customers directly in their restaurant. There are many commercial premises currently for lease on Clayton Road. They have managed to find one of suitable size, and location with good car parking around. They want to set up the business from scratch utilising their brand name. They are willing to enter a ten-year lease for the premises and have estimated an initial outlay of $300,000 for kitchen equipment, restaurant furniture and refitting of the premises. They currently have roughly $50,000 in their bank account and will therefore need to borrow another $250,000 at an 8% interest only loan, paid monthly, principal payable at the end of year 10. New staff will be required under this option; additional chef and staff for waiting on tables, along with increases in promotional materials etc. See Proforma (Budgeted) Statements for estimated performance of shop front option. option 2; recreate the same existing model in a different venue (Investment life 5 years) They will need to recreate the same business model they are currently running, but in another location. Relocation costs are estimated at $50,000. The business will run the same way for the next five years at the same level as the year just passed (year 2021). Revenues and expenses assumed to remain the same over the next five years, as the year just passed. (See Income Statement 2021) Jason and James has provided you with the following financial reports. J&J Cuisine Income Statement J&J Cuisine Proforma (Budgeted) Income Statements 2022 2023-2031 $ $ 2021 Revenue Sales 388,800.00 388,800.00 420,000.00 Restaurant meals sales 102,500.00 325,000.00 Total 388,800.00 491,300.00 745,000.00 Expenses Grocery expense Petrol expense 106,380.00 104,500.00 176,000.00 6,480.00 3,880.00 4,200.00 322,400.00 268,000.00 172,100.00 21,600.00 20,700.00 23,261.00 133.33 133.33 133.33 600.00 600.00 600.00 Wages expense Packaging Supplies Depreciation expense - Vacuum sealer Depreciation expense -Bowl sealing machine Depreciation expense - website Depreciation - car Depre - kitchen equip / rest furniture / refit Promotional / Advertising 400.00 400.00 400.00 2,000.00 2,000.00 2,000.00 45,000.00 50,000.00 45,000.00 15,000.00 42,000.00 Rent expense 42,000.00 Electricity and Gas 15,840.00 15,180.00 1,120.00 26,000.00 22,000.00 3,200.00 Water 3,800.00 Business registration fee Interest expense 20,000.00 20,000.00 Total 341,833.33 582,413.33 680,794.33 64,205.67 Profit (loss) 46,966.67 -91,113.33 The required rate of return is 15% Required: 1. Calculate ARR 2. Calculate the net cash flow for JJ Asian Cuisine for each proposal 3. Calculate payback, IRR, NPV, and EAA for both options 4. Comment on the outcome 5. Calculate the IRR and Payback for both proposals

Answer & Explanation Solved by verified expert

See Answer