A grocery store manager must decide whether to buy four rug cleaners to rent to customers. The manager estimates that the first would yield $200 a year, the second $150, the third $75, and the fourth $20. If the interest rate is 12 percent and each rug cleaner costs $500, how many should the manager buy?

Question

Business

Nico Huerta

29 April, 03:58

A grocery store manager must decide whether to buy four rug cleaners to rent to customers. The manager estimates that the first would yield $200 a year, the second $150, the third $75, and the fourth $20. If the interest rate is 12 percent and each rug cleaner costs $500, how many should the manager buy?

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Answers (1)

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Kaufman · Answer 1

It will purchase three.

Explanation:

the return will be:

income / investment

1ST rug cleaners: 200/500 = 40% return

2 rug cleaners: 150/500 = 30% return

3 rug cleaners: 75/500 = 15% return

4 rug cleaners: 20/500 = 4% return

As the current market rate is 12% if the forth rug cleaner is pruchased it will not turn out profitable.