Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: - You can rent a location for your business at a cost of $36,000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000. - Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. • Other operating costs would include $58,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission The simple rate of return for this investment opportunity is closest to: Multiple Choice 22.0% 19.0% 26.6% 15.7%
Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: - You can rent a location for your business at a cost of $36,000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000. - Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. • Other operating costs would include $58,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission The simple rate of return for this investment opportunity is closest to: Multiple Choice 22.0% 19.0% 26.6% 15.7%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity:
• You can rent a location for your business at a cost of $36,000 per year.
The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000
Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales.
• Other operating costs would include $58,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission
The simple rate of return for this investment opportunity is closest to:
Multiple Choice
22.0%
19.0%
26.6%
15.7%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc5ea1a2e-5d73-47b6-bcbb-e03ac027f730%2Fe3f8d47c-def8-4c4d-a36b-b5776e58123e%2F2zdihja_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity:
• You can rent a location for your business at a cost of $36,000 per year.
The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000
Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales.
• Other operating costs would include $58,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission
The simple rate of return for this investment opportunity is closest to:
Multiple Choice
22.0%
19.0%
26.6%
15.7%
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