Question
Scenario: Integrating ProblemSam has a job as a pharmacist earning $30,000 per year. and she is deciding if she should accept another job making $40,000per
Scenario: Integrating ProblemSam has a job as a pharmacist earning $30,000 per year. and she is deciding if she should accept another job making $40,000per year OR to purchase a pharmacy that generates revenue of $200,000per year. To purchase the pharmacy she must use her $20,000 savings and borrow another $80,000 at an interest rate of 10% per year. The pharmacy that she is considering to purchase has additional expenses of $80,000per year for supplies, $40,000 per year for hired help, $10,000per year for rent, and $5,000per year for utilities. Assume income and business taxes are zero and that the repayment on the principle of the loan does not start before three years.Questions to answer:a). What would be the business and economic profit if Sam purchased the pharmacy? Should she purchase the pharmacy?b). Suppose that Sam expects another pharmacy to open nearby at the end of three years and that this will drive the economic profit of the pharmacy to zero. What would the revenue of the pharmacy be in three years?c). What theory of profit would account for profits being earned by the pharmacy during the first three years of operation?d). Suppose that Sam expects to sell the pharmacy at the end of three years for $50, 000 LESS than the price she paid for it and that she requires a 15% return on her investment. Should she still purchase the pharmacy?
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