To understand the situation of Joe's shoeshine stand business, let's break down the information provided:
1. Total Revenue: Joe's total revenue for a year is $16,000.
2. Rent Expenses: Joe pays $500 annually for rent.
3. Entrepreneurial Earnings: The text states that entrepreneurs in the shoeshine stand business earn $11,000 a year. However, it doesn't specify whether this refers to Joe's actual earnings or the average earnings for entrepreneurs in this industry.
4. Borrowed Money: Joe borrowed $600 at a 20% interest rate for buying equipment.
5. Offer for the Business: At the end of the year, Joe was offered $400 for his business and all the equipment.
Now, let's analyze the situation:
Net Income: To determine Joe's net income, we need to subtract his expenses (rent) from his revenue:
Net Income = Total Revenue - Rent Expenses
Net Income = $16,000 - $500 = $15,500
Interest Expense: Joe borrowed $600 at a 20% interest rate, so the interest expense for the year can be calculated as:
Interest Expense = Borrowed Amount x Interest Rate
Interest Expense = $600 x 0.20 = $120
Profit Before Offer: To calculate Joe's profit before the offer for his business, we subtract the interest expense from his net income:
Profit Before Offer = Net Income - Interest Expense
Profit Before Offer = $15,500 - $120 = $15,380
Profit After Offer: If Joe accepts the $400 offer for his business, we subtract this amount from his profit before the offer:
Profit After Offer = Profit Before Offer - Offer Amount
Profit After Offer = $15,380 - $400 = $14,980
Based on the available information, Joe's business, including equipment, would be valued at $400 if he accepts the offer.