Discussion One - Lemonade vs. Orange Juice

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Class 01 Discussion - Lemonade vs. Orange Juice

Review the following information for Js Lemonade Stand and Cs Orange Juicery and then answer the discussion questions.

Js Lemonade Stand

Fact J1: On January 1, Js Lemonade Stand was started on an initial investment of $50,000, provided by a group of investors.

Fact J2: On January 1, J purchased a lemonade-making machine with $20,000 cash, and they expect to use the machine for five years.

Fact J3: During the year, J purchased $25,000 of water, sugar, and lemons, all of which was converted into lemonade and sold.

Fact J4: In exchange for the lemonade they sold, (a) J collected $35,000 of cash from customers; and (b) Some customers have not yet paid J in cash, but have promised to pay $5,000 by January 31 of the next year.

Cs Orange Juicery

Fact C1: On January 1, Cs Orange Juicery was started on an initial investment of $100,000, provided by a group of investors.

Fact C2: On January 1, C purchased a juicer for $40,000 cash, and they expect to use the machine for five years.

Fact C3: During the year, C purchased $40,000 of water, sugar, and oranges, all of which was converted into orange juice and sold.

Fact C4: In exchange for the orange juice they sold, (a) C collected $45,000 of cash from customers; and (b) Some customers have not yet paid C in cash, but have promised to pay $15,000 by January 31 of the next year.

Answer the following questions

1) Which company do you think performed better during the year? Give two reasons why you think so.

2) If you could have been one of the initial investors into one of these companies, providing $10,000 in cash investment, which company would you choose? Give two reasons why you chose that company.