Entrepreneurs in the shoeshine stand business earn 11000 a year Joe pays the rent of 500 a year and his total revenue is 16000 a year.he borrowed 600 at 20 percent a year to buy equipment.at the end of the year Joe offered 400 for his business and all his equipment.
To understand the situation of Joe's shoeshine stand business, let's break down the information provided:
1. Total Revenue: Joe's total revenue for a year is $16,000.
2. Rent Expenses: Joe pays $500 annually for rent.
3. Entrepreneurial Earnings: The text states that entrepreneurs in the shoeshine stand business earn $11,000 a year. However, it doesn't specify whether this refers to Joe's actual earnings or the average earnings for entrepreneurs in this industry.
4. Borrowed Money: Joe borrowed $600 at a 20% interest rate for buying equipment.
5. Offer for the Business: At the end of the year, Joe was offered $400 for his business and all the equipment.
Now, let's analyze the situation:
Net Income: To determine Joe's net income, we need to subtract his expenses (rent) from his revenue:
Net Income = Total Revenue - Rent Expenses
Net Income = $16,000 - $500 = $15,500
Interest Expense: Joe borrowed $600 at a 20% interest rate, so the interest expense for the year can be calculated as:
Interest Expense = Borrowed Amount x Interest Rate
Interest Expense = $600 x 0.20 = $120
Profit Before Offer: To calculate Joe's profit before the offer for his business, we subtract the interest expense from his net income:
Profit Before Offer = Net Income - Interest Expense
Profit Before Offer = $15,500 - $120 = $15,380
Profit After Offer: If Joe accepts the $400 offer for his business, we subtract this amount from his profit before the offer:
Profit After Offer = Profit Before Offer - Offer Amount
Profit After Offer = $15,380 - $400 = $14,980
Based on the available information, Joe's business, including equipment, would be valued at $400 if he accepts the offer.