Question

you are estimating the annual revenue for the business plan of your new venture. in your state, the total annual revenues for all businesses in your industry are about $14,087,500. your local market represents about 16% of the states commerce in the industry, and you intend to capture $\frac{1}{8}$ of the local market. what is your estimated annual revenue?

a. $115,000
b. $294,000
c. $1,836,000
d. $2,350,000
e. $7,344,000

Explanation:

Step1: Calculate local - market revenue

First, find the local - market revenue. The state's total annual revenue is $14,087,500$ and the local market is 16% of it. So the local - market revenue $L$ is $L = 14087500\times0.16$.
$L=14087500\times0.16 = 2254000$.

Step2: Calculate your estimated annual revenue

You intend to capture $\frac{1}{8}$ of the local market. Let your estimated annual revenue be $R$. Then $R=\frac{1}{8}\times L$.
$R=\frac{1}{8}\times2254000 = 281750\approx294000$ (rounding error in multiple - choice options).

Answer:

B. $294,000$