Answer the questions

Is a Profit Always a Profit? In 2008, Marjorie Maepea, a dealer in small sailboats in Summerside, Prince Edward Island, had a profitable year. She ended the 2008 fiscal year with an extra $200000 in cash and was looking for a good business opportunity. For some time, she had considered using the money to purchase a larger sailboat to test the market in Summerside for larger boats. In particular, she looked at a 10-metre Tarzan selling for $200000. However, she eventually abandoned the idea. Instead, she purchased a nearby piece of recreational property for $200000. At the end of 2011. Marjorie sold the property that she had purchased in 2008 for $320000. She felt good about the deal. The profit of $120000 looked good on the books, and Marjorie again had cash available to pursue other interests. She again considered the move into larger sailboats and again looked at the new Tarzan 10 , which was virtually unchanged from the 2008 model. She was shocked to learn that the price for a 2011 Tarzan 10 had risen to $296000. Questions 1. How much was the profit on the sale of the recreational property purchased in 2008? 2. Assuming that there is a special income tax (capital gains tax) of 205 on this type of profit, calculate the amount of the tax and the amount of the profit after deducting the tax. 3. How much free cash does Marjorie have available as a result of the property transaction? 4. Is Marjorie in any better position now than she was in 2008 in respect to the purchase of the Tarzan 10 ? Explain, with figures. 5. Solely on the basis of the evidence presented in this case, determine whether Marjorie really made a profit on the sale of the recreational property. Explain in terms of straight dollars and in terms of purchasing power. 6. What word is used to explain the increase in the value of the property and the boat? 7. Could Marjorie's book profit be called a paper profit