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For this exercise you will use the web pages for Costco.com. Suppose you have decided to start a small business selling snacks from vending machines. Lynn University has allowed you to place a vending machine in the Ritter Building. Rental for the space will cost \$300 per month. You will purchase the vending machine and the snack products at Costco.

Assume the following for this machine at the Ritter Building:

You will purchase the cheaper of the two vending machines offered by Costco. This machine will be depreciated over three years on a straight line basis.

Delivery costs will be \$100 per month.

You will sell Oreo Cookies, Cheese and Peanut Butter Crackers, Famous Amos Chocolate Chip Cookies, and Cheez-It Cracker Snacks. On average the costs of these snacks will be \$.53 per unit.

The vending machine price for these snacks will be \$1.00.

Other monthly costs are \$150.

Your tax rate is 35 percent.

How much revenue each month does the machine need to produce for you to earn \$300 after taxes each month? After making your computations does this seem like a good business venture for you?

Assume that instead of placing a machine at the Ritter Building, you will place a machine in the Library. For the purpose of this analysis assume the following:

You will purchase the more expensive vending machine, also depreciated over three years.

Delivery costs will be \$150 per month.

Other monthly costs will be \$200 per month.

In addition to selling the above snack items, you will also sell water and soft drinks, which on average will cost you \$.60 per unit.

The vending machine price for the beverages will be \$1.50. You expect to sell three beverages for each snack product.

The rental cost will remain at \$300 per month.

The tax rate is still 35 percent.

How much revenue each month does the machine need to produce for you to earn \$450 after taxes each month? After making your computations does this seem like a good business venture for you?