Harvey quit his job where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. Tostart the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year,the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employeewages and benefits, and rent on a building.The total revenues for the firm in the first year were:Multiple ChoiceO $605,000$825.000$50,000$100,000O

Given that Firm sold 11000 units of software at $75 each unit since: Total Revenue= Quantity×Per…

Answered: Harvey quit his job where he earned…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Harvey quit his job at State University, where he earned $62,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $4,000 a year. To start the business, he cashed in $50,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 10,000 units of software at $72 for each unit. Of the $72 per unit, $60 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.
George used to work as a research analyst earning $80,000 per year. George has decided that he has had enough of the rat race and has decided to start his own business, and so he bought a local kebab shop for $45,000. To pay for the business, he took out his term deposit of $90,000 which until then was earning him 5.6% interest p.a. With the remainder of the money, he used it to pay a part time assistant of $25,000, and he runs the business by himself the rest of the time. He used the remainder of the money to pay for stock. In his first year of the business, George took in $50,00o sales. (a) As an accountant, work out Georges profit during the first year of trading. (b) As an economist, work out George's profit during the first year of trading.
Juan’s company said that company employees could put up to 15% of their salary into a 401(k) plan. The company would match it dollar for dollar. Juan made $80,000 and he and his wife were in the 33% tax bracket. The investment earned 8% a year. Jesse decided to save 15% on his own by putting the money in the bank every month at 2% interest. After five years, how much did Juan have? How much did Jesse have? Be sure to consider income tax in your calculations.
Jerry was working as a veternarian, and he earned an annual income of $135,000. He had savings of $86,000 in the bank, which was earning 3% interest per year. Then he decided to quit and start his own landscaping business. He used his $86,000 savings to purchase a truck and equipment. The values for his first year with his new business were: Revenue 265,000 Wages for employees 108,000 Insurance 2990 Depreciation 1920 Gasoline and vehicle 6125 maintenance Calculate Jerry's accounting profit for his first year. Answer:
A man formerly employed as a chief mechanic of an automobile repair shop has saved P1,000,000 which are now invested in certain securities giving him an annual dividend of 15%. He now plans to invest this amount in his own repair shop. In his present job, he is earning P25,000 per month, but he has to resign to run his own business. He will need the services of the following: 2 mechanics each earning P400 a day, and 8 helpers earning P200 a day. These men will work on average 300 days a year. His other expenses are the following: Rental = P30,000 a month Miscellaneous = P25,000 a month Sales tax = 3% of gross income Insurance = 2% The Length of his lease is 5 years. If the average charge for each car repair by his shop is P1,000. Determine the number of cars he must service in one year so that he will obtain a profit of at least 20% on his investment?
A man formerly employed as chief mechanic of an automobile repair shop has saved P1,000,000.00 which are now invested in certain securities giving him an annual dividend of 15%. He now plans to invest this amount in his own repair shop. In his resents job, he is earning P25,000.00 a month, but he has to resign to run his own business. He will need the services of the following: 2 mechanics each earning P400.00 a day, and 8 helpers each earning P200.00 a day. These men will work on the average300 days per year. His other expenses are the following: Rental 30, 000.00 a monthMiscellaneous 25,000 a monthSales tax 3% of gross incomeInsurance 2% The length of his lease is 5 years. If the average charge for each car repaired by his shop is P1,000.00.Determine the number of cars he must service in one year so that he will obtain a profit of at least 20% on his investment?
Jowel Smithers and Sonda Richards merged all of their financial resources and opened a mobile phone sales and repair business in the upscale Domain Mall in Los Angeles 10 years ago with an initial investment of $2.5 million. As revenues increased significantly over the first 4 years, they took out salaries that totaled $500,000 each year for the two of them. With increased success, they decided to pay themselves a total of $1.7 million each year from years 5 through 10. They hoped at the initiation of the joint business venture to make 10% per year on the investment in terms of salaries. (a) Determine the equivalent future worth after 10 years of the salaries. (b) If they had been satisfied with a $5 million future worth, calculate the size that the initial investment could have been instead of the $2.5 million, provided they had the funds available.
Art Neuner, an investor in real estate, bought an office condominium. The market value of the condo was $255,000 with a 70% assessment rate. Art feels that his return should be 12% per month on his investment after all expenses. The tax rate is $31.50 per $1,000. Art estimates it will cost $250 per month to cover general repairs, insurance, and so on. He pays a $120 condo fee per month. All utilities and heat are the responsibility of the tenant. Calculate the monthly rent for Art. (Round your intermediate calculations and final answer to the nearest cent.)
Art Neuner, an investor in real estate, bought an office condominium. The market value of the condo was $280,000 with a 80% assessment rate. Art feels that his return should be 10% per month on his investment after all expenses. The tax rate is $32.50 per $1,000. Art estimates it will cost $275 per month to cover general repairs, insurance, and so on. He pays a $140 condo fee per month. All utilities and heat are the responsibility of the tenant. Calculate the monthly rent for Art.
Art Neuner, an investor in real estate, bought an office condominium. The market value of the condo was $300,000 with a 80% assessment rate. Art feels that his return should be 10% per month on his investment after all expenses. The tax rate is $32.50 per $1,000. Art estimates it will cost $275 per month to cover general repairs, insurance, and so on. He pays a $140 condo fee per month. All utilities and heat are the responsibility of the tenant. Calculate the monthly rent for Art. (Round your intermediate calculations and final answer to the nearest cent.) Monthly rent 2 of 7 Next > < Prev
Celia, age 30 is leaving a major systems development company to establish her own firm. She will design computer-based systems for small- and medium-sized businesses. Celia will invest $100,000 in the business. She hopes to operate near her breakeven point during her first year, although a small loss is possible. Profits will build up slowly over the next four years until she is earning $150,000 a year in her fifth year. Celia has heard about S Corporations and asks you whether the S Corporation form would be advisable for her new business. How would you respond to Celia's inquiry?
ary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the present value factor you will use for the net annual cash flows?

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