Question
Let's compare two relatively new companies who began operations at the same time, Portrait Inc and 50 Interiors. In their third year of business, Portrait Inc had a net income of \( \$ 235,000 \) while SO Interiors had a net income of \( \$ 155,000 \). Both companies built a business plan for future growth beyond the third year. Portrait inc projected an increase in net income of \( \$ 23,500 \) per year, while SO Interiors' plan aimed to increase its net income by \( 19 \% \) each year. Step \( \mathbf{4} \) of 5: If both companies were able to meet their net income growth goals, which company would you choose to invest in? Why? Select all answers that apply. Answer 2 Points Keypad Keyboard Shortcuts SO Interiors: If you are able to invest money for more than 4.5 years, then their income will continue to grow at a faster rate. Portrait Inc: If you are able to invest money for more than 4.5 years, then their income will continue to grow at a faster rate. SO Interiors: If you are able to invest money for less than 4.5 years, then you will get a quick return on your investment. Portrait Inc: If you are able to invest money for less than 4.5 years, then you will get a quick return on your investment.
Ask by Maxwell Moreno. in the United States
Jan 24,2025
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Answer
**Selected Answers:**
- SO Interiors: If you invest for more than 4.5 years, their income grows faster.
- Portrait Inc: If you invest for less than 4.5 years, you get a quick return.
**Explanation:**
- **Portrait Inc** offers steady, linear growth of \$23,500 per year, making it ideal for short-term investments (less than 4.5 years) for quick returns.
- **SO Interiors** provides exponential growth at 19% annually, which accelerates income increases over longer investment periods (more than 4.5 years).
Choose **Portrait Inc** for short-term investments and **SO Interiors** for long-term growth.
Solution
The correct choices are:
- **SO Interiors:** If you are able to invest money for more than 4.5 years, then their income will continue to grow at a faster rate.
- **Portrait Inc:** If you are able to invest money for less than 4.5 years, then you will get a quick return on your investment.
**Explanation:**
1. **Portrait Inc** has a linear growth of \$23,500 per year. This ensures a steady and predictable increase in net income, making it a safer and quicker return option in the short term (less than 4.5 years).
2. **SO Interiors** grows exponentially at a rate of 19% per year. While this means slower initial growth, over time (more than 4.5 years), the compounding effect results in faster and larger increases in net income compared to the linear growth of Portrait Inc.
Choosing between the two depends on your investment timeline:
- **Short-term Investors (<4.5 years):** Prefer **Portrait Inc** for quicker returns.
- **Long-term Investors (>4.5 years):** Prefer **SO Interiors** for greater income growth over time.
**Selected Answers:**
- SO Interiors: If you are able to invest money for more than 4.5 years, then their income will continue to grow at a faster rate.
- Portrait Inc: If you are able to invest money for less than 4.5 years, then you will get a quick return on your investment.
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Simplify this solution The Deep Dive
Investing in SO Interiors would be a fantastic option if your timeline is less than 4.5 years. Given the percentage growth model they projected, your returns will be more substantial in the short term. Say goodbye to lackluster returns and hello to that wonderful feeling of quickly seeing your money multiply! On the flip side, if you’re in it for the long haul (over 4.5 years), Portrait Inc starts shining brighter. Their consistent yearly increase in net income means that after a while, the compounding effect could really ramp up their profitability, giving you a rewarding return for your patience. So whether you’re a sprinter or a marathoner in investing, there’s a sweet spot for both!
