5 Fortune: One of Many Chinese Restaurants

Zhichuan (Frank) Li

Product #:9B16N002_P

Supplier:Ivey

Discipline:Entrepreneurship, Finance

Setting:Canada, 2014

Details:Case (PDF) • 4 pages • 2016-02-05 (Rev: 2016-10-18)

Your Price:

$9.71

Language:

Format:

Purchase this material with a free Educator Account and enjoy more benefits:

Free Educator Copy
Free Teaching Notes
Build your coursepack
Discounted academic price

In 2014, a newcomer to Canada has the opportunity to start a Chinese restaurant in a small Canadian city. The entrepreneur needs to decide whether to invest in the project, and if so, how to finance it: using debt or equity financing. She has to evaluate the impact of the financing options on the viability of the business, her investment returns, and the financial and business risks. The case provides an opportunity for a comprehensive FRICTO analysis of capital structure, and creates tension by putting the students in a small business owner’s shoes.

Learning Objectives

The case can be used in introductory finance, accounting, and entrepreneurship to:

Introduce basic financial concepts such as opportunity cost, sunk cost, capital structure, financial and business risks, and agency problems.
Analyze viability of the investment; i.e., EBIT, net income, cash flow, net present value, return on investment, break-even point, and payback period.
Do sensitivity analysis based on different business outcomes
Demonstrate how financing options (debt versus equity) could impact the level and variation of investment returns.

5 Fortune: One of Many Chinese Restaurants

Subjects:

Industries:

Geography:

Learning Objectives