Pete Owns a Shoe-Shine Business

question 222

Multiple Choice

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements? (i) shoe polish
(ii) rent on the shoe stand
(iii) wages Pete could earn delivering newspapers
(iv) interest that Pete's money was earning before he spent his savings to set up the shoe­
Shine business

• A) (i) only
• B) (i) and (ii) only
• C) (iii) and (iv) only
• D) (i), (ii), (iii), and (iv)

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Definitions:

Internal Rate of Return

A financial metric used to estimate the profitability of potential investments, calculated as the rate at which the net present value of costs equals the net present value of benefits.

Discount Factor

A multiplier used to determine the present value of a future cash flow, reflecting the time value of money.

Cash Inflows

The total amount of money coming into a business from various sources, such as sales, investments, and financing activities.

Intangible Benefits

Advantages or gains that cannot be easily measured or quantified, such as brand reputation or employee morale.