Refer to the In Class Notes file and focus on the following image. Assume the Original Equity investment was $1,000,000. In Transaction 4 above, if the company had purchased 3 towe... Refer to the In Class Notes file and focus on the following image. Assume the Original Equity investment was $1,000,000. In Transaction 4 above, if the company had purchased 3 towers at $125,000 each and then sold each tower at $150,000 each for cash, how much would be the Profit?
Understand the Problem
The question is asking for the profit calculation from a transaction involving the purchase and sale of cell towers. It provides details on the original investment, purchase price, and sale price of the towers, and the user must determine the profit made from this transaction.
Answer
The profit is $75,000.
Answer for screen readers
The profit from selling the cell towers is $75,000.
Steps to Solve
- Calculate Total Cost of Purchase The company purchased 3 towers at a cost of $125,000 each.
Total cost of purchase can be calculated as: $$ \text{Total Cost} = 3 \times 125,000 = 375,000 $$
- Calculate Total Revenue from Sale The company sold each tower at $150,000.
Total revenue from selling 3 towers can be calculated as: $$ \text{Total Revenue} = 3 \times 150,000 = 450,000 $$
- Calculate Profit Profit is calculated as the difference between total revenue and total cost:
$$ \text{Profit} = \text{Total Revenue} - \text{Total Cost} $$ Substituting the values: $$ \text{Profit} = 450,000 - 375,000 = 75,000 $$
The profit from selling the cell towers is $75,000.
More Information
The result of $75,000 indicates the financial gain from the transaction. This means that after covering the costs of purchasing the towers, the company generated this amount from its sales.
Tips
- Not multiplying the quantity of towers correctly when calculating total cost and revenue.
- Confusing revenue with profit; remember that revenue is the total income before expenses.
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