Question
Now that Tracey has completed her first year in her business, she would like to expand to another location. She has looked at a property
Now that Tracey has completed her first year in her business, she would like to expand to another location. She has looked at a property near Ft. Lee. She feels this is a prime location since she could provide cupcakes for events and office celebrations at Ft. Lee. She can purchase the property for $50,000 and believes she can build a building with all of the equipment for an additional $150,000. The estimated sales at the new location is $225,000 with a net operating income of $30,000. Her minimum required rate of return is 12%. Tracy remembers studying return on investment and residual income from her college classes. Calculate Tracys margin, turnover, return on investment and residual income. Your assignment is to write a professional memo to Tracy explaining what is the residual income, return on investment, margin, and turnover on this new venture. Calculate all, explain your calculations, and if this will be a good investment for her. Explain in laymans terms.
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