Refer to the Scenario Below to Answer the Following Questions

question 31

Multiple Choice

Refer to the scenario below to answer the following questions.
A Mature Café (Scenario)
Sarah has been growing and operating her café in an upscale neighbourhood. She is happy with how the business has continued to increase in revenues as her customer base has become loyal over the years. She has just over 30 employees, two of whom are managers.
The lease on the space is coming up for renewal and this has brought up the notion of leaving the business and exploring other interests she has in travelling through Africa and Southeast Asia. Sarah has worked hard and she wants to be sure she gets as much out of the business as she put into it.
Another factor is the increasing competition in the area and the sinking feeling she has that it will be next to impossible to differentiate her business from the big chains opening on several street corners. Her fear is that her sales may have plateaued and there in fact will be a decrease in sales in the near future.
-It is difficult for Sarah to sell her business, as it would be for many entrepreneurs. She has created it from nothing and sees all of her heart and soul in the venture. She has consoled herself that it is at least worth a lot of money-perhaps enough for her to retire on (and she is only 42) . She needs to be sure she gets a(n) _______________ so she can decide clearly if it is worthwhile to sell the business.

• A) psychiatrist to help her with her emotions
• B) second opinion from her closest friends
• C) lawyer to draft a purchase and sale agreement
• D) business valuation
• E) accountant to tell her what the tax implications might be if she sells

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Definitions:

Economic Model

A simplified representation or framework that economists use to describe and analyze economic processes, relationships, or phenomena.

Capital Goods

Long-lasting goods purchased and used by businesses to produce goods and services and contribute to their output.

Investment

The allocation of resources, often money, into assets or projects with the expectation of generating profit or income.

Marginal Costs

The increase in the sum total of expenses that comes with the production of one additional unit of a product or service.