General Education Development (GED) Practice Exam

To determine how long it will take to earn back the initial investment, we first need to calculate the net monthly profit. The gross revenue each month is $8,000, and the monthly expenses are $5,000. Therefore, the profit earned each month would be:

Monthly Profit = Monthly Gross Revenue - Monthly Expenses

Monthly Profit = $8,000 - $5,000 = $3,000

Next, we need to see how many months it will take to cover the initial investment of $100,000 using the monthly profit. We can do this by dividing the total investment by the monthly profit:

Months to Recover Investment = Initial Investment / Monthly Profit

Months to Recover Investment = $100,000 / $3,000 ≈ 33.33

Since it isn't possible to earn a fraction of a month, we round up to 34 months. This indicates that it will take a little over 33 months to fully recoup the initial investment, confirming that the correct choice is indeed less than 34 months. Hence, the answer correctly estimates the time frame required for the business owner to recover the investment through the monthly profits generated.