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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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  1. 27 June, 21:09
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    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.
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