#
Question

Use the following information to work Problems 1 and 2.

Michael is an Internet service provider. On December 31, 2009, he bought an existing business with servers and a building worth $400,000. During his first year of operation, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000.

1.What was Michael’s gross investment, depreciation, and net investment during 2010?

2.What is the value of Michael’s capital at the end of 2010?

3.Lori is a student who teaches golf on the weekend and in a year earns $20,000 after paying her taxes. At the beginning of 2010, Lori owned $1,000 worth of books, CDs, and golf clubs and she had $5,000 in a savings account at the bank. During 2010, the interest on her savings account was $300 and she spent a total of $15,300 on consumption goods and services. There was no change in the market values of her books, CDs, and golf clubs.

a.How much did Lori save in 2010?

b.What was her wealth at the end of 2010?