CFA Level I · CFA Level I Exam · Introduction to Financial Statement Modeling
A restaurant chain has 200 restaurants at the start of the year and plans to open 20 new ones, all at mid-year. Average revenue per restaurant is 3.0 million per full year. New restaurants earn half a year of revenue, and existing restaurants' revenue is flat. Using a bottom-up approach, forecast revenue (in millions) is closest to:
Forecast revenue is about 630 million. Existing restaurants generate 200 × 3.0 = 600 million, and 20 new restaurants open at mid-year add 20 × 3.0 × 0.5 = 30 million. Counting a full year for the new restaurants would overstate revenue at 660 million.
- A600
- B630Correct
- C660
Explanation
Existing restaurants: 200 × 3.0 = 600. New restaurants: 20 × 3.0 × 0.5 = 30. Total = 630. The 660 option wrongly gives the new restaurants a full year of revenue.
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