Suppose that you and two friends have an opportunity to purchase a pizza restaurant. Each of you would put up $75,000. The revenue from the restaurant is expected to remain $200,000 per year for the next several years. The costs (not including the opportunity costs of your investment) of operating the restaurant are expected to remain steady at $185,000 for the next several years. The current market rate of interest is 7 percent per year. Should you go in on this deal? Explain.

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The Answer of Suppose that you and two friends have an opportunity to purchase a pizza restaurant. Each of you would put up $75,000. The revenue from the restaurant is expected to remain $200,000 per year for the next several years. The costs (not including the opportunity costs of your investment) of operating the restaurant are expected to remain steady at $185,000 for the next several years. The current market rate of interest is 7 percent per year. Should you go in on this deal? Explain.

Suppose That You and Two Friends Have an Opportunity to Purchase