An Entrepreneur Is Considering How Many Limousines to Purchase When

question 95

Multiple Choice

An entrepreneur is considering how many limousines to purchase when he starts up a limousine service. Below are his estimates of the number of limousine rentals the service will make during a year, depending on the number of limousines available. After paying all non-interest expenses, the owner expects to net $10 per rental. Each limousine costs $50,000. How many limousines should he purchase if the real interest rate is 5.5%?

• A) 1.
• B) 2.
• C) 3.
• D) 4.

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Definitions:

Accounting Cycle

The four-step procedure of an accounting system: examining source documents, recording transactions in an accounting journal, posting recorded transactions, and preparing financial statements.