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. $2,500 per month rent. C. $500 administrative costs, $2,500 per month rent. D. $1,000 per month interest payments, $2,500 per month rent.
Incremental cash flows do not include interest payments on investment capital, since the cash flows should be equally generated if you invest your own money, another partner invests his money or someone else lends it to you. The same logic applies to the administrative costs of the credit line.
A long term goal is something that a person has that requires planning and most of the time, involves their career or what they want to do in the future, Something that isn't going to come to an end anytime soon. So, the answer is 4.
