An existing and established restaurant chain wants to openanother location. Their analysis tells them that the new buildingwill lease for $4k monthly. They would need to make $500k inimprovements, which they would depreciate over 10 years. Salariesfor new employees would be $400K per year. Food costs would be 25%of sales. Incremental revenues are expected to be $120K per monthinitially with 3% growth year over year. If their existing tax rateis 22% and the existing expected return is 15%, what is theincremental value of the new location?
