Samantha Roberts has a job as a pharmacist earning $30,000 per year, and she is deciding whether to take another job as the manager of another pharmacy for $40,000 per year or to purchase a pharmacy that generates a revenue of $200,000 per year. To purchase the pharmacy, Samantha woud have to use her $20,000 savings and borrow another $80,000 for supplies, $40,000 for hired help, $10,000 for rent, and $5,000 for utilities. Assume that income and business taxes are zero and that the repayment of the principle of the loand does not start before three years. (a) What would be the business and economic profit if Samantha purchased the pharmacy? (b) Suppose that Samantha expects that another pharmacy will open nearby at the end of three years and that this will drive the economic profit of the pharmacy be in three years? (d) Suppose that Samantha expects to sell the pharmacy at the end of the three years for $50,000 more than the price she paid for it and that she requires a 15 percent return on her investment. Should she still purchase the pharmacy? I've never done a problem like this before so I just want to get clarification on how to properly solve this problem. The basic math prinicples aren't an issue (I took Calculus in highschool) I just never took a business math class like this before so the concepts are tripping me up a bit (i.e. I'm not sure what numbers to use/not use). Any help would be greatly appreciated.
Samantha Roberts has a job as a pharmacist earning $30,000 per year, and she is deciding whether to take another job as the manager of another pharmacy for $40,000 per year or to purchase a pharmacy that generates a revenue of $200,000 per year. To purchase the pharmacy, Samantha woud have to use her $20,000 savings and borrow another $80,000 for supplies, $40,000 for hired help, $10,000 for rent, and $5,000 for utilities. Assume that income and business taxes are zero and that the repayment of the principle of the loand does not start before three years. (a) What would be the business and economic profit if Samantha purchased the pharmacy? (b) Suppose that Samantha expects that another pharmacy will open nearby at the end of three years and that this will drive the economic profit of the pharmacy be in three years? (d) Suppose that Samantha expects to sell the pharmacy at the end of the three years for $50,000 more than the price she paid for it and that she requires a 15 percent return on her investment. Should she still purchase the pharmacy?
I've never done a problem like this before so I just want to get clarification on how to properly solve this problem. The basic math prinicples aren't an issue (I took Calculus in highschool) I just never took a business math class like this before so the concepts are tripping me up a bit (i.e. I'm not sure what numbers to use/not use). Any help would be greatly appreciated.
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