A Local Restaurant Owner Is Considering Expanding into Another Rural

question 140

Multiple Choice

A local restaurant owner is considering expanding into another rural area.The expansion project will be financed through a line of credit with City Bank.The administrative costs of obtaining the line of credit are $500,and the interest payments are expected to be $1,000 per month.The new restaurant will occupy an existing building that can be rented for $2,500 per month.The incremental cash flows for the new restaurant include

• A) $500 administrative costs, $1,000 per month interest payments, $2,500 per month rent.
• B) $500 administrative costs, $2,500 per month rent.
• C) $1,000 per month interest payments, $2,500 per month rent.
• D) $2,500 per month rent.

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