Question

Assume that a national restaurant firm called BBQ builds 12 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $300,000 of equipment and furnishings. To help partially defray the cost of this expansion, BBQ issues and sells 240,000 shares of stock at $35 per share. Instructions: Round your answers to 1 decimal place. a. What is the amount of economic investment that has resulted from BBQ’s actions?

Answer 1

Answer:

Total economic investment = $15.6 million

Explanation:

Economic investment is defined as addition that contributes to a company's capital stock. Examples of capital stock are new equipment, a housing facility, or a new materials for production.

In this scenario the addition to capital stock is by 12 restaurant buildings and additional equipment

Economic investment by building = 12 buildings * 1 million = $12 million

Economic investment from equipment = 12 buildings * 300,000 = $3,600,000

Total economic investment = 12 million + 3,600,000 = $15.6 million