Suppose that you and your four siblings are given an opportunity to purchase a video rental store. Each of you would put up $50,000. The revenue from the store is expected to remain $350,000 per year for the next several years. The costs (not including the opportunity costs of your investment) of operating the store are expected to remain steady at $320,000 for the next several years. The current market rate of interest is 5 percent per year. Should you go in on this deal? Explain.

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The Answer of Suppose that you and your four siblings are given an opportunity to purchase a video rental store. Each of you would put up $50,000. The revenue from the store is expected to remain $350,000 per year for the next several years. The costs (not including the opportunity costs of your investment) of operating the store are expected to remain steady at $320,000 for the next several years. The current market rate of interest is 5 percent per year. Should you go in on this deal? Explain.

Suppose That You and Your Four Siblings Are Given an Opportunity