Question: Francesca would like to lease a coffee cart in Aspen

Francesca would like to lease a coffee cart in Aspen, Colorado. The lease is $800 per month and a city license to sell food and beverages costs $20 per month. The lessor of the stand has shown Francesca records indicating that gross revenues average $32 per hour. The out-of-pocket costs for ingredients are generally about 40% of gross revenues. Last year she paid 25% of her income in federal taxes.
Francesca pays $1,000 per month for her condominium. She could store the cart overnight in the condo’s garage, which is currently unused. Real estate developers in Aspen estimate that about
20% of the cost of a residential building is for the garage.
At present, Francesca is earning $2,400 per month as a ski instructor for one of the big ski areas. In the summertime she earns about the same income working as a kayaking instructor.

A. List each piece of quantitative information in this problem. For each item, indicate whether it is relevant to Francesca’s decision and explain why.
B. If Francesca leases the cart and works 30 days in a month, how many hours will she have to work each day, on average, to be at least as well off financially as she is in her current job?
C. If Francesca wants to work only 25 days per month, how much will revenues have to increase for her to work 4 hours per day and be as financially well off as she is in her current job?
D. Can Francesca be certain that her revenues will average $32 per hour? Why or why not?
E. What other information might help Francesca with this decision?

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  • CreatedJanuary 26, 2015
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