Denise is planning to open a take-away business in Hobart, which will sell healthy hamburgers…

Denise’s take-away business venture Denise is planning to open a take-away business in Hobart, which will sell healthy hamburgers prepared with fresh, local ingredients. These will come in two sizes: regular and large, and each order will be served with hot chips and a soft drink. The business will be open 4pm-8pm, 7 days a week, with all orders being filled and served on a drive-through basis Denise has two options: to buy an existing take-away business, or open a new one. If she goes with the first option, she envisages financing the purchase cost ($160,000) with a bank loan. The furniture and kitchen equipment will need to be replaced at 5-yearly intervals. If she goes with this first option, sales for the first quarter are expected to be: Regular Large Total Sales (unit) 18,000 16,500 34,500 The sales growth is expected to be 5% per quarter. If Denise goes with the second option, she will buy standard furniture and fittings at a cost of $25,000. She estimates that these will need to be replaced every 10 years. She also plans to purchase kitchen equipment, at $100,000, to be financed with a bank overdraft. This equipment will also need to be replaced at 10-year intervals. With this option, Denise has been advised that sales will be 20% lower than with the first option in the first year only. The business will also need a website, and advertising space in the local newspaper.


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