Sam's business will cost $49,500 to set up and run for the first year. Sam then expects an annual operational expense total of $30,500. According to Sam's model, how long will it take Sam to see an overall profit in his business (where total profits exceed total expenses) ?

Question

Noe Quinn

Business

27 June, 21:03

Sam's business will cost $49,500 to set up and run for the first year. Sam then expects an annual operational expense total of $30,500. According to Sam's model, how long will it take Sam to see an overall profit in his business (where total profits exceed total expenses) ?

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Answers (1)

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Greta Harrell · Answer 1

Within 2 years

Explanation:

1st year of Sam's business:

Operational expense = $30,500

Profit = $45,000

Business set up costs = $49,500

Overall business profit (Loss) = $ (4,500)

2nd Year of Sam's business:

Since the profit will be increased by 5.5%, the new profit after operational expenses will be $45,000 + $ (45,000 x 5.5%) = $47,475

Therefore, the overall profit = Last year's loss + This year's profit = $ (-4,500+47,475) = $42,975

Therefore, he can achieve the overall profit within 2 years' of operation.