Carni Vore represents a meat sandwhich restautant chain that is expanding into a
ID: 2788996 • Letter: C
Question
Carni Vore represents a meat sandwhich restautant chain that is expanding into a new, large metropolitan area. He currently has $2 million to invest and
wants to open several restaurants. He found out that each site will require a cash outlay or $230,000 for leasing, equipment, and initial inventory. Carni is currently
looking at 20 sites. The first 15 sites have positive net present values; sites 16 through 20 have negative net present values.
A: What is the maximum number of restaurants that Carni can establish for his company? Explain.
B: How many restaurants can Carni open if his employer increases his budget to $5 million? Explain.
Explanation / Answer
a) maximum no of sites that can be opened= 2000000/230000 = 8.69 = 8 sites
b) if budget increased to 5 million = 5000000/230000= 21.73=21 but as only first 15 sites have positive net value on thise 15 sites should be opened hence answer is 15