A group of businessmen formed a partnership to buy and race an Indianapolis-type racing car. They agreed to pay an individual $50,000 for the car and associated equipment. The payment was to be in a lump sum at the end

A group of businessmen formed a partnership to buy and race an Indianapolis-type racing car. They agreed to pay an individual $50,000 for the car and associated equipment. The payment was to be in a lump sum at the end of the year. In what must have been "beginner's luck," the group won a major race the first week and $80,000. The rest of the first year, however, was not as good: at the end of the first year, the group had to payout $35,000 for expenses plus the $50,000 for the car and equipment. The second year was a poor one: the group had to pay $70,000 just t()clear up the racing debts at the end of the year. During the third and fourth years, racing income just equaled costs. When the group was approached by a prospective buyer for the car, they readily accepted $80,000 cash, which was paid at the end of the fourth year. What rate of return did the businessmen obtain from their racing venture?

Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...

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Posted Date: February 25, 2010 02:42:22