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I                 You have a bike store. Your assets consist of $10,400 in inventory, $1,000 in equipment...

I                 You have a bike store. Your assets consist of $10,400 in inventory, $1,000 in equipment (phones, computers, etc.) and $600 cash. You are capitalized with $10,000 owners’ equity and $2,000 debt at 6%. Assume your only variable cost are the bikes you purchase from the manufacturer, $60/bike. Your fixed costs total $2500.

                  During the year you purchased 250 bikes and sold them at $80/bike. But you only paid for half the bikes you bought; the rest were sold to you “on credit.” Your profits tax rate is 20%. What is your ROE for the year?

                  You “took out” all the profits. Do the “money in – money out” to calculate the net change in cash for the year. What does your balance sheet look like at the end of the year?

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