Question

As a food truck flipper (i.e. you establish and then sell profitable food trucks around the United States to make a profit), you’ve just found the perfect opportunity to invest in a gently “used” food truck in the Buffalo area. You plan to launch a new business selling specialty foods and beverages in the Buffalo area. Specifically, your plan is to build a profitable food truck business and then sell the business to a local investor for (hopefully) a large profit. It will cost $75,000 to purchase this used food truck truck and an additional $15,000 for the necessary modifications, equipment, and permits for your business. You anticipate that the first year will be financially difficult while you get your business established and therefore anticipate that you will have $80,000 in revenue but $100,000 in expenses this year. You anticipate a much stronger second year in business and, at the end of the year, anticipate that you’ll be able to sell this new business and its assets (food truck and equipment) for $125,000. What is your rate of return on this investment?

Answer 1