Problem
Your father worked as a real estate agent for a real estate company earning $75,000 per year. In 2022, he decided to quit his job at the real estate company and open his own real estate business. He took $100,000 out of one of his investment accounts that had been earning 7% a year and used that money to start up the business. In addition, he converted a building that he owns, which previously rented for $36,000 a year, into an office. He worked hard the first year, hiring one employee for an annual salary of $40,000. By the end of the year, the shop generated total revenue in the amount of $200,000. Total spending on office supplies, utilities, transportation and other expenses for the year was $50,000.
By the end of the year, your father tells you that he is pleased that his business is profitable and that he will continue to own and manage it in anticipation of making similar profits in the future. Evaluate your father's decision.