Question Details

Alex and Blake launch a joint tech venture by contributing $10,000 and $15,000, respectively. After 3 months, Alex reduces his capital by withdrawing 20% of his initial contribution, while Charlie joins the project by investing an amount equal to 40% of Blake's initial contribution. If the enterprise earns a total net profit of $112,000 at the end of one year, what is the combined share of profit earned by Alex and Charlie?

Options

A

$52,000

B

$64,000

C

$48,000

D

$56,000

E

$50,000

Show Answer

Correct Answer :

Option A

$52,000

Solution :

The correct answer is $52,000.

To find the combined share of profit earned by Alex and Charlie, we calculate the equivalent monthly investment (Capital × Time in months) for each partner over the 1-year period (12 months).

1. Alex's Total Investment:
Alex begins with an initial capital of $10,000 for the first 3 months.
After 3 months, he withdraws 20% of his initial contribution:
Withdrawal=20%×10,000=2,000
His remaining capital for the remaining 9 months is:
Reduced Capital=10,000-2,000=8,000
Total equivalent monthly investment for Alex:
Alex's Equivalent Capital=(10,000×3)+(8,000×9)=30,000+72,000=102,000

2. Blake's Total Investment:
Blake keeps his initial contribution of $15,000 unchanged for the entire 12 months.
Total equivalent monthly investment for Blake:
Blake's Equivalent Capital=15,000×12=180,000

3. Charlie's Total Investment:
Charlie joins after 3 months, so his investment lasts for 9 months.
His capital contribution is 40% of Blake's initial contribution:
Charlie's Capital=40%×15,000=6,000
Total equivalent monthly investment for Charlie:
Charlie's Equivalent Capital=6,000×9=54,000

4. Profit Sharing Ratio:
The ratio of profit distribution among Alex, Blake, and Charlie is proportional to their total equivalent investments:
Alex:Blake:Charlie=102,000:180,000:54,000
Dividing all terms by 6,000 simplifies the ratio to:
Ratio=17:30:9
Total ratio parts:
Total Parts=17+30+9=56

5. Combined Profit Share of Alex and Charlie:
The enterprise earned a total net profit of $112,000.
The combined ratio parts belonging to Alex and Charlie are:
Combined Parts=17+9=26
Therefore, their combined profit share is:
Combined Share=2656×112,000=26×2,000=52,000

The combined share of profit earned by Alex and Charlie is $52,000.

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