Business Finance
A new restaurant is ready to open for a business. It is estimated that the food cost (variable cost) will be 40% of sales, while fixed cost will be $ 450,000. The first year's sales are $ 1,250,000. The cost to start up this restaurant will be $ 2,000,0000. Two considered alternatives will be considered a) 50% equity financing, 50% debts at 10%, or b) all equity financing common stocks common stock can be sold at $5 per share. (show all your work)
a. Compute the operating break-even point in dollars
b. Compute DOL
c. Compute DFL and DCL for both financing plans