Question

Assume that a national restaurant chain called BBQ builds 20 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $400,000 of equipment and furnishings. To help partially defray the cost of this expansion, BBQ issues and sells 400,000 shares of stock at $40 per share.

Instructions: Enter your answers rounded to 1 decimal place.



a. What is the amount of economic investment that has resulted from BBQ’s actions?


b. How much purely financial investment took place?

Answer 1

The answer to your question is B because 40 dollars will share amongst the others

Answer 2

a. $28 million

b. $15 million.

Explanation:

a. The amount of economic investment that has resulted from BBQ's actions can be calculated by summing up the cost of building 20 new restaurants and the cost of outfitting them with equipment and furnishings.

So:

Therefore, the amount of economic investment is $28 million.

b. The purely financial investment refers to the money raised by BBQ through the sale of shares of stock. BBQ issued and sold 400,000 shares of stock at $40 per share. To calculate the purely financial investment:

`\begin{aligned}\textsf{ Purely financial investment }&\sf =\textsf{ (Number of shares $*$ Price per share) }\\\\ &\sf= (400,000 shares * \$40/share) \\\\ &\sf =\$16,000,000\end{aligned}`

So, the purely financial investment is $16 million.