We know two friends that have decided to work together in a start-up business in Ithaca; they want to open a herbal shop. Dolores used to work as a high school teacher for $40,00 per year but quit in order to start her own catering business. Louis used to work as a high counselor for $30,000 per year but quit in order to start her own catering business They borrowed $30,000 from the bank; the banks charges 10 % interest per year. Interest is paid one time at the end of the year. During the year they will pay $30,000 for ingredients per year and will receive revenue of $100,000 per year. They agreed to share the expenses and revenue. There is no cost in closing the business, and they can return to their former jobs. We learn that they can return to the former jobs anytime they wish. Since they agreed to equally share the accounting profit, will this business survive and should they even try to operate the business based on economic theory?
We know two friends that have decided to work together in a start-up business in Ithaca; they want to open a herbal shop. Dolores used to work as a high school teacher for $40,00 per year but quit in order to start her own catering business. Louis used to work as a high counselor for $30,000 per year but quit in order to start her own catering business They borrowed $30,000 from the bank; the banks charges 10 % interest per year. Interest is paid one time at the end of the year. During the year they will pay $30,000 for ingredients per year and will receive revenue of $100,000 per year. They agreed to share the expenses and revenue. There is no cost in closing the business, and they can return to their former jobs.
We learn that they can return to the former jobs anytime they wish. Since they agreed to equally share the accounting profit, will this business survive and should they even try to operate the business based on economic theory?
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