Judy Blue,CEO of the Clothing Store All Blue,is Planning to Open

question 69

Multiple Choice

Judy Blue,CEO of the clothing store All Blue,is planning to open a new store in Manhattan.She plans to purchase a small storefront for $5,250,000 which has a remaining useful life of 15 years.She plans to hire 2 part-time sales clerks and will pay each of them $34,000 per year in wages and other benefits.Judy expects that revenues will average $86,000 per month and other monthly operating costs will run $13,200.What is the accounting rate of return for the Manhattan store?

• A) 15.3%
• B) 8.7%
• C) 10%
• D) 1.1%

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Definitions:

Cash Flow

The total financial movement entering and exiting a business, substantially affecting its operational liquidity.

Present Value

The current value of a future amount of money or a series of future payments, discounted at a specific rate.

Future Value

The value of an asset or cash at a specific date in the future that is equivalent in value to a specified sum today.

Precedent

A legal decision or form of proceeding serving as an authoritative rule or pattern in future similar or analogous cases.