Prob Session 1 You know that profit of a company is sales (revenue) of whatever you sale less the costs of making (or buying) whatever you sale. 1) Evaluate on a 1 year basis. You're given 4 different investment options, below. Which one do you choose and why, in terms of Rate of Return? If you have lots of money lying around and want to invest in more than one, what order would they be? A. Magic machine that costs $120K but gives you a profit of $12K a year later B. Company requires an investment of $60K and they will give you your money back plus $6K C. A $75,000 system produces widgets you can sell, earning you an extra $6800 D. A mutual fund with a minimum entry amount of $100K that yields $13K in interest 2) Evaluate on a 1 year basis. You take out a loan to start your consulting firm at 10% / year. The costs are as follows: A. Building deposit and furniture: $30K B. Building rental and staff salaries for a year: $180K C. Origination, loan, and recording fees: $2K D. Since you're a newbie with no past credentials, you also have to take out a loan insurance policy of %5 of the total loan amount from A and B that is rolled into the amount you borrow i. How much money did you borrow that you get to use? How much did you borrow in total, i.e. includes D though you don't get to use that money? What is the total amount of interest you had to pay? What if you include the fees? ii. What is the effective interest rate? That is to say, with all that you had to pay, what was the effective rate? ill. If you made $230K from selling your service for the first year then what is your rate of return