Refer to Scenario 9

question 263

Multiple Choice

Refer to Scenario 9.3 below to answer the question(s) that follow.
SCENARIO 9.3: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly) . Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $5 on average per meal.
-Refer to Scenario 9.3. Economic profit per week is

• A) ‐$400.
• B) $0.
• C) $600.
• D) $900.

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Definitions:

Stated Value

A value assigned to a security or asset which is not determined by market forces.

Shares

Ownership segments in a corporation or financial asset, allowing for an equal share in declared profits, distributed as dividends.

No-Par Common Stock

Equity securities issued without a par value, where the board of directors determines the issuing price.

Par Preferred Stock

Preferred shares of a company's stock issued at a specific nominal value and with fixed dividend payments.