Investors Bill and Maggie lend $60,000 to each new idea. Bill picks low-risk projects that are successful 60% of the time. Maggie takes on high-risk projects that that are successful 20% of the time
What rate of return must each successful project pay Bill and Maggie for them to break even?
What will be an ideal response?
Answer: With Bill's rate of success, we know that six out of ten projects are successful and that Bill is repaid the loan six out of ten times. Therefore, he must get enough funding from the six successful projects to cover all ten. So if he makes ten loans of $60,000 each, he needs to recover $600,000 from the six successful projects.
Thus each successful project must repay = $100,000. Therefore, the loan "return" rate on each successful project must be: = 66.67%.
Maggie's rate of success of 20% means that she has two successful projects out of every ten and so:
= $300,000 needs to be recovered giving a loan return rate of:
= 400% from each of the two successful projects.
You might also like to view...
Tubaugh Corporation has two major business segments-East and West. In December, the East business segment had sales revenues of $690,000, variable expenses of $352,000, and traceable fixed expenses of $104,000. During the same month, the West business segment had sales revenues of $140,000, variable expenses of $56,000, and traceable fixed expenses of $24,000. The common fixed expenses totaled $162,000 and were allocated as follows: $89,000 to the East business segment and $73,000 to the West business segment.The contribution margin of the West business segment is:
A. $84,000 B. $145,000 C. $422,000 D. $234,000
Identify the verb tense in this sentence: Miriam has lived in London since 2005
a. present b. present perfect c. past perfect
Around 2006, hybrid cars moved from the early adopter to the early majority stage. What did this mean for marketers of hybrid cars?
What will be an ideal response?
A limited liability company is a citizen of every state of which its members are citizens.?
Indicate whether the statement is true or false