Business, 26.03.2020 20:04 aaivey9815

Suppose that you have the opportunity to invest $50,000 in a new restaurant in
South Bend. (FYI: Dr. HG Parsa of Ohio State University has done a study that
shows that 59% of restaurants fail within the first three years!).
a) Given the following data, what is your opportunity cost here? Explain.
Asset Annual Return
5 year Government Bond 1.25%
DJIA (Stocks) 7%
"Junk" Bonds (CCC or below) 13%
Note: CCC bonds have an average default rate of 27%

b) Now, suppose that as a part owner, you are allowed to eat for free as
often as you like. How does this change your calculation from (a)?

Answers: 2

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Suppose that you have the opportunity to invest $50,000 in a new restaurant in
South Bend. (FY...

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