The investors plan to expand the company globally in its third year of operation. Some of the countries they can expand to first include Canada and Mexico. This is because, the two countries are closer to the United States and their markets might have similar dynamics to US markets. Secondly, these markets have a high demand and affordable labor because of their high populations and fast growing middle class consumers.
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The tax rates for Canada and Mexico are 38% and 30% respectively . This would not change the decision to expand to these markets since the returns are also significantly high. In the event of the start-up receiving the first 300k at the beginning and the second 200k after three years, I would use the first 300k to fund the internal operations of the business and the second 200k would be used to expand the business.
Break-even analysisThe company is expected to breakeven in its third year of operation. The company would require capital of about 800K US dollars in the first three years. The first 500K would be provided by through venture capital by investors and the remaining would be borrowed. By the end of the third, the restaurant’s free cash flows would be $1000. The company would have reached its break-even point.
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