Answer:
the amount that should be paid for the policy is $431,034.48
Explanation:
The computation of the amount that should be paid for the policy is given below:
Present value of perpetual cash flow = Perpetual cash flow ÷ Rate of return
= $25,000 ÷ 5.8%
= $431,034.48
Hence, the amount that should be paid for the policy is $431,034.48
The same should be considered and relevant
Which of the following is not an advantage of issuing bonds instead of common stock? tax savings result income to common shareholders may increase earnings per share on common stock may be lower stockholder control is not affected
Answer: earnings per share on common stock may be lower
Explanation:
Some of the advantages of the issuance of bonds instead of common stock is that it helps in saving tax.
Also, the income to the common shareholders may increase and there is no impact on the control of the stockholder.
It should be noted that "earnings per share on common stock may be lower" isn't an advantage of issuing bonds instead of common stock.
Analyse the causes and origin of employment syndrome in Zimbabwe
Answer:
The causes for employment syndrome are Due to the drought a large number of people migrated to the urban areas in search of employment. Another drought occurred in 1995 - 1996 which worsened the economic situation. Unemployment increased due to retrenchments and business closures.
The title is in the picture
On 1/1, Florida Power and Light Energy bought a single piece of equipment by paying $7,000 cash. They also incurred freight charges and taxes of $224 on 1/1 and paid for these items with cash, also. The market value of this equipment is $13,000. What amount should be recorded in Florida Power and Light's Equipment Account on 1/1?
Answer:
the amount that should be recorded in Florida Power and Light's Equipment Account on 1/1 is $7,224
Explanation:
The computation of the amount that should be recorded in Florida Power and Light's Equipment Account on 1/1 is shown below:
= Purchase price of an equipment + freight charges & taxes
= $7,000 + $224
= $7,224
Hence, the amount that should be recorded in Florida Power and Light's Equipment Account on 1/1 is $7,224
what's pricing strategy
Answer:
A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors.
Explanation:
A business can use a variety of pricing strategies when selling a product or service. To determine the most effective pricing strategy for a company, senior executives need to first identify the company's pricing position, pricing segment, pricing capability and their competitive pricing reaction strategy
Explanation:
hope it help
plss brainlys me…thanks for the points
In attempting this merger between Comcast and Time Warner, their executives were trying to fulfill their overriding goal as managers. which of the following best describes that goal?
a. advancing the technology of the industry helps all industry participants
b. the overriding goal of managers is to maximize the value of a company for its shareholders
c. managers are tasked the performing value-chain functional activities at the lowest possible cost.
d. ultimately, a company looks to expand its business activities beyond one market or industry.
Answer:
B
Explanation:
In the cost reconciliation report under the FIFO method, the costs to be accounted for equals the cost of beginning work in process inventory plus the cost of units transferred out.
a. True
b. False
Answer:
Cost Reconciliation Report under FIFO Method:
The costs to be accounted for equals the cost of beginning work in process inventory plus the cost of units transferred out.
b. False
Explanation:
Instead, the costs to be accounted for under the FIFO method in the cost reconciliation report are equal to the cost of the beginning work in process inventory plus the cost of units started and completed during the period. It is under the weighted-average method that the costs to be accounted for in the cost reconciliation report equal the cost of beginning work in process inventory plus the cost of units transferred out.
You took ACC111 where the Owner's Equity section consisted of Capital and Owner's Withdrawals. Now that you've seen the corporate structure of the Owner's Equity section, how do the individual items in the Sole Proprietor's Equity section translate to the Corporate Equity section? For example, Revenues are closed out into Capital for Sole Proprietor, Where does it go for Corporate?
Answer:
Revenues are closed out to Equity (Retained Earnings) for Corporate.
Explanation:
Actually, for both Sole Proprietor and Corporate, the account that is closed out to Capital or Equity is the difference between the Revenue and the Expenses for the accounting period. This is more specifically referred to as Net Income. This is the bottom-line profit, which is available for distribution to the owners of the entity in the form of capital withdrawals for Sole Proprietorships and dividends for Corporate entities.
River co. just paid a dividend of $2 per share out of earnings of $4 per share. If its book value per share is $25 and its stock is currently selling for $40 per share, calculate the required rate of return on the stock.
Answer:
13.4%
Explanation:
Calculation to determine the required rate of return on the stock.
First step
g = (1 - 0.5)(4/25)
g = 0.08*100
g = 8%
Now let determine the required rate of return
r = [(2 * 1.08)/40] + 0.08
r= 13.4%
Therefore the required rate of return on the stock is 13.4%
Question 9 Suppose money invested in a hedge fund earns 1% per trading day. There are 250 trading days per year. What will be your annual return on $100 invested in the fund if the manager allows you to reinvest in the fund the 1% you earn each day
Answer:
1103.22%
Explanation:
The value of the investment at the end of the year assuming 250 trading days per year can be computed the future value formula provided below:
FV=PV*(1+daily return)^n
PV=initial investment=$100
daily return=reinvestment rate=1%
n=number of trading days in a year=250
FV=$100*(1+1%)^250
FV=$ 1,203.22
Annual return=( 1,203.22/$100)-1
Annual return=1103.22%
In its 2001 annual report, investors of Adelphia Communications were startled to find a footnote to its financial statements that reported the company had guaranteed as much as $2.7 billion in loans to a private entity owned by CEO John Rigas and his family. As a result of the footnote, Adelphia lost more than 50 percent of its market value in little more than a week.
Required:
Explain why you think the market value of Adelphia fell so dramatically with the footnote disclosure that the company had guaranteed loans to an entity owned by the company's CEO and his family
Answer:
Explanation:
The transaction of $2.7 billion as a loan lender to a private corporation controlled by the CEO John Rigas plus his family suggests a significant likelihood of asset theft and fraudulent activity. The misappropriation of assets is a sign of a company's financial instability. It implies that people in charge of administration are not using the firm's profits to maximize shareholders' wealth, but rather are advancing the interests of only one shareholder.
As soon as the news reaches the investors, a reasonable investor would sell his stock holdings and divest from the firm. As a result of the bulk of investors' divestment, stock prices have dropped by more than 50% in a week in Adelphia Communications.
WatchNU is a company that designs and manufacturers drones for military use. The supply manager is getting ready to renegotiate the contract with the security service provider that it uses for its offices and manufacturing plant. Three suppliers responded to the RFP for security services for the next three years. The current security services provider, SecureIT quoted $945,000 per year. Two suppliers that have not been used by WatchNU in the past quoted $1,048,000 and $1,056,000 respectively. The supply manager is also analyzing the costs associated with insourcing security services rather than using a supplier as a way to reduce costs and provide greater control over security. The salary and benefits for a full-time security services manager is estimated to be $99,000. Other fixed costs are estimated to be $29,000/year. Three security guards are needed 24 hours/day, 365 days per year. The salary and benefits for the security guards is $34/hour.
Required:
What are the costs to insource the security services?
Answer:
Variable Cost $893,520
Fixed Cost $128,000
Total Cost $1,021,520
Explanation:
Calculation to determine the costs to insource the security services
VARIABLE COST
Using this formula
Variable cost =Total Quantity of Output x Variable Cost Per Unit
Let plug in the formula
Variable cost =3* ($34/hour x 24 hours/day x 365 days per year)
Variable cost = $893,520
FIXED COST
Using this formula
Fixed cost=Salary and Benefits for a full time security service manager+Other Fixed Costs
Let plug in the formula
Fixed cost=($99,000) + ($29,000)
Fixed cost= $128,000
TOTAL COST
Using this formula
Total Cost = Variable Cost + Fixed Cost
Let plug in the formula
Total Cost=($893,520) + ($128,000)
Total Cost= $1,021,520
Therefore the costs to insource the security services will be:
Variable Cost $893,520
Fixed Cost $128,000
Total Cost $1,021,520
A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a:_________
a. credit to Prepaid insurance for $400.
b. debit to Insurance expense for $400.
c. credit to Insurance expense for $400.
d. debit to Prepaid insurance for $400.
e. debit to Insurance expense for $4,800.
Answer: a. credit to Prepaid insurance for $400.
b. debit to Insurance expense for $400
Explanation:
The required adjusting journal entry on December 31 will be:
Debit Insurance expense = ($4800 *1/12) = $400
Credit Prepaid Insurance = $400
(To record insurance expired for 1 month for December)
Therefore, the correct options are A and B.
If a well-diversified portfolio of stocks has an expected return of 15% when the expected return on the market portfolio is 10%, then:_____
a. Treasury bills are offering a 7% yield.
b. The portfolio beta is greater than 1.0.
c. The portfolio beta equals 1.67.
d. The investor's portfolio contains many defensive stocks.
Answer:
B
Explanation:
According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
Systemic risk is measured by beta. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors
Market beta is represented by 1. If a portfolio has a beta that is higher than 1, it means that it is more risky than the market portfolio and investors would demand a higher return than the market portfolio
Why are accountability and trust so important in using emerging technologies?
Answer:
lows immediate reconciliation, improves the integrity of data and generates trust because it allows participants to provide increased transparency to stakeholders and gain control of their own operations in a digital environment
Japanese officials are considering a new tariff on imported pork products from the United States in an attempt to reduce Japan’s reliance on U.S. pork. Due to political pressure, the U.S. International Trade Representative’s (ITR) office is also considering a new tariff on imported steel from Japan. Officials in both Japan and the U.S. must assess the social welfare ramifications of their tariff decisions. Reports from a reliable think-tank indicate the following: If neither country imposes a new tariff, social welfare in Japan’s economy will remain at $4.8 billion and social welfare in the United States will remain at $44 billion. If both countries impose a new tariff, welfare in the United States declines 0.5 percent to $43.78 billion and welfare in Japan declines by 0.8 percent to $4.76 billion. If Japan does not impose a tariff but the United States does, projected welfare in Japan is $4.66 billion while welfare in the United States is $44.2 billion. Finally, if the U.S. does not impose a tariff but Japan does, welfare is projected at $43.66 billion in the United States and $4.85 billion in Japan. Determine the Nash equilibrium outcome when policy makers in the two countries simultaneously but independently make tariff decisions in a myopic (one-shot) setting. Is it possible for the two countries to improve their social welfare by "agreeing" to different strategies? Explain
Answer:
Explanation:
The following is the Nash equilibrium between the United States and the Japanese Nation, as well as the payoff:
Japanese Nation
Tariff (billion) No Tariff (billion)
Tariff $43.78 , $4.76 $44.2 , $4.66
United States
No Tariff $43.66 , $4.85 $44 , $4.8
From the Nash equilibrium; the United States implements Tariffs and the Japanese Nation also implements Tariff with the outcome ($43.78, $4.76) as the dominant strategy each for the United States and Japanese Nation:
(to implement tariff).
By agreeing to adopt No tariff, the two nations may be able to increase their social welfare.
On the other hand, the decision to implement no tariffs relies on the event being performed indefinitely, thereby utilizing trigger methods when the interest rate is very low.
Auctio sells sprockets in a perfectly competitive market. Below are its short-run total variable costs at different output levels. The firm's fixed cost is $5. The market price of one sprocket is $8. Units Total Variable Cost 0 $0 1 $12 2 $18 3 $22 4 $28 5 $35 6 $43 What is the average total cost of the 5th unit
Answer:
$36
Explanation:
Average total cost = total variable cost + fixed cost ) / output
total variable cost = variable cost x output
35 x 5 = 175
175 + 5) / 5 = 36
What would be the net annual cost of the following checking accounts?
a. Monthly fee, $2.75; processing fee, 50 cents per check; checks written, an average of 30 a month. (Do not round intermediate calculations. Round your answer to 2 decimal places. Input the amount as a positive value.)
For this one, I got $213.
b. Interest earnings of 4 percent with a $450 minimum balance; average monthly balance, $600; monthly service charge of $20 for falling below the minimum balance, which occurs five times a year (no interest earned in these months). (Do not round intermediate calculations. Round your answer to 2 decimal places. Input the amount as a positive value.)
Not sure how to do this one exactly.
Answer: $86
Explanation:
Net Annual cost is:
= Total service charge - Interest earned
Total service cost = Service charge * Number of months
= 20 * 5
= $100
Interest earned = Average monthly balance * interest rate * Remaining months
= 600 * 4% * (12 - 5 months) / 12 months
= 600 * 4% * 7/12
= $14
Net Annual cost:
= 100 - 14
= $86
Fill in the missing numbers in the following income statement:
Sales $645,000
Costs 346,500
Depreciation 97,200
EBIT $
Taxes (35%)
Net income $
Required:
a. What is the OCF?
b. What is the depreciation tax shield?
Answer:
See below
Explanation:
EBIT = Sales - Cost - Depreciation
= $645,000 - $346,500 - $97,200
= $201,300
Taxes = EBIT × 35%
= $201,300 × 35%
= $70,455
Net income = EBIT - Taxes
= $201,300 - $70,455
= $130,845
1. OCF
= Net income + Depreciation
= $130,845 + $97,200
= $228,045
2. Depreciation tax shield
= Depreciation × Tax rate
=$97,200 × 35%
= $34,020
Suppose that an economy produces 500 units of output. It takes 10 units of labor at $15 a unit and 4 units of capital at $50 a unit to produce this amount of output. The per unit cost of production is:________.A. $1.42B. $1.24C. $0.70D. $0.40
Answer:
Option A is correct.
Explanation:
Below is the calculation:
Total number of units produces = 500 units
Number of labour = 10
Labour cost = $15 per unit
Total capital = 4 units
Cost of capital = $50 per unit
Total cost = 10 x 15 + 4 x 50 = 350
Per unit cost = 500 / 350 = 1.42
Thus option A is correct.
Rowan Co. purchases 500 common shares (40%) of JBI Corp. as a long-term investment for $630,000 cash on July 1. JBI Corp. paid $14,750 in total cash dividends on November 1 and reported net income of $295,000 for the year. (1) - (3) Prepare Rowan's entries to record the purchase of JBI shares, the receipt of its share of JBI dividends and the December 31 year-end adjustment for its share of JBI net income.
Answer and Explanation:
The journal entries are shown below;
On Jul 01
Equity method investments $630,000
To Cash $630,000
(Being cash paid is recorded)
On Nov 01
Cash $5,900 (40% of $14,750)
Equity method investments $5,900
(Being cash receipt is recorded)
On Dec 31
Equity method investments $118,000 (40% of $295,000)
To Earnings from equity method investments $118,000
(Being sharing of the net income is recorded)
The Corbit Corp, sold merchandise for $10,000 cash. The cost of orp. sold merchandise for $10,000 cash. The cost of the se sold was $7,590. The journal entries to record this transaction under the perpetual inventory system would be:______.
A. Cash 10,000 Merchandise Inventory Cost of Merchandise Sold 10,000 7,590 7,590 Sales
B. Cash 10,000 Sales 10,000 Cost of Merchandise Sold 7,590 7,590 Merchandise Inventory
C. Cash 10,000 Sales 10,000 Merchandise Inventory Cost of Merchandise Sold 10,000 10,000
D. Cash 7,590 Sales 7,590 Cost of Merchandise Sold Merchandise Inventory 7,590 7,590
Answer:
B. Cash 10,000 Sales 10,000 Cost of Merchandise Sold 7,590 7,590 Merchandise Inventory
Explanation:
The journal entry is shown below:
cash $10,000
To sales $10,000
(being cash receipts is recorded)
Here cash is debited as it increased the assets and credited the sales as it also increased the revenue
cost of merchandize sold $7,590
To merchandize inventory $7,590
(being cost of merchandise sold is recorded)
Here cost is debited as it increased the expense and credited the merchanidse inventory as it decreased the inventory
The annual commissions per salesperson employed by a manufacturer of light machinery averaged $40,000 with a standard deviation of $5,000. What percent of the sales persons earn between $32,000 and $42,000?
A) 60.06%.
B) 39.94%.
C) 34.13%.
D) 81.66%.
Answer:
A
Explanation:
From the given information;
The required probability needed to carry out is P(32000<X<42000);
Given that:
mean [tex]\mu[/tex] = 40000
standard deviation [tex]\sigma[/tex] = 5000
Using the standard normal distribution;
[tex]P(32000 <X<42000) = ( \dfrac{x - \mu}{\sigma} <Z< \dfrac{x - \mu}{\sigma})[/tex]
[tex]P(32000 <X<42000) = ( \dfrac{32000 - 40000}{5000} <Z< \dfrac{42000 - 40000}{5000})[/tex]
[tex]P(32000 <X<42000) = ( -1.6<Z<0.4)[/tex]
Here, the region of the area lies between -1.60 and 0.40
∴
P(320000 < X < 40000) = P(Z<0.40) - P(Z< -0.40)
From Z tables;
P(320000 < X < 40000) = 0.6554 -0.0548
P(320000 < X < 40000) = 0.6006
P(320000 < X < 40000) = 60.06%
Sales information for Tesla Inc. follows.Year Ended December 31 ($ thousands) 2018 2017 2016Automotive sales $17,631,522 $8,534,752 $5,589,007Automotive leasing 883,461 1,106,548 761,759Total automotive revenues 18,514,983 9,641,300 6,350,766Services and other 1,391,041 1,001,185 467,972Total automotive & services and other segment revenue 19,906,024 10,642,485 6,818,738Energy generation and storage segment revenue 1,555,244 1,116,266 181,394Total revenues $21,461,268 $11,758,751 $7,000,132Automotive sales revenue includes revenues related to sale of new Model S, Model X and Model 3 vehicles, including access to our Supercharger network, internet connectivity, Autopilot, full self-driving and over-the-air software updates.Automotive leasing revenue includes the amortization of revenue for Model S and Model X vehicles under direct lease agreements as well as those sold with resale value guarantees accounted for as operating leases under lease accounting. We do not yet offer leasing for Model 3 vehicles.Services and other revenue consists of non-warranty after-sales vehicle services, sales of used vehicles, sales of electric vehicle components and systems to other manufacturers, retail merchandise, and sales by our acquired subsidiaries to third party customers.Energy generation and storage revenues consists of the sale of solar energy systems and energy storage systems to residential, small commercial, and large commercial and utility grade customers.Compute the relative size of sales revenue from the four types of revenue Tesla discloses. (Hint: Scale each type of revenue by total revenue.)Round answers to the nearest whole percentage.
Answer:
Tesla Inc.
The Relative Size of Sales Revenue from the Four Types of Revenue
Year Ended December 31 2018 2017 2016
Automotive sales 82% 73% 80%
Automotive leasing 4% 9% 11%
Services and other 7% 9% 7%
Energy generation & storage revenue 7% 9% 2%
Total revenues 100% 100% 100%
Explanation:
a) Data and Calculations:
Year Ended December 31 ($ thousands) 2018 2017 2016
Automotive sales $17,631,522 $8,534,752 $5,589,007
Automotive leasing 883,461 1,106,548 761,759
Total automotive revenues 18,514,983 9,641,300 6,350,766
Services and other 1,391,041 1,001,185 467,972
Total automotive & services revenue 19,906,024 10,642,485 6,818,738
Energy generation & storage revenue 1,555,244 1,116,266 181,394
Total revenues $21,461,268 $11,758,751 $7,000,132
Year Ended December 31 2018 2017 2016
($ thousands)
Automotive sales $17,631,522 $8,534,752 $5,589,007
Automotive leasing 883,461 1,106,548 761,759
Services and other 1,391,041 1,001,185 467,972
Energy generation & storage 1,555,244 1,116,266 181,394
Total revenues $21,461,268 $11,758,751 $7,000,132
2018:
Automotive sales = 82% ($17,631,522/$21,461,268 * 100)
Automotive leasing = 4% ($883,461/$21,461,268 * 100)
Services and others = 7% ($1,391,041/$21,461,268 * 100)
Energy generation & storage = 7% ($1,555,244/$21,461,268 * 100)
2017:
Automotive sales = 73% ($8,534,752/$11,758,751 * 100)
Automotive leasing = 9% ($1,106,548/$11,758,751 * 100)
Services and others = 9% ($1,001,185/$11,758,751 * 100)
Energy generation & storage = 9% ($1,116,266/$11,758,751 * 100)
2016:
Automotive sales = 80% ($5,589,007/$7,000,132 * 100)
Automotive leasing = 11% ($761,759/$7,000,132 * 100)
Services and others = 7% ($467,972/$7,000,132 * 100)
Energy generation & storage = 2% ($181,394/$7,000,132 * 100)
name the institution that makes it possible for investors to buy and sell shares in South Africa
Answer:
Johannesburg Stock Exchange
Explanation:
Sau khi thực hiện kiểm toán, KTV xác định là:
1- BCTC theo mục đích chung của công ty được trình bày hợp lý
2- Bộ phận thu quỹ của công ty không hữu hiệu
3- Thuế TNDN của cty tính toán không phù hợp với luật thuế
4- Quốc hội muốn kiểm tra chi tiêu của Bộ Quốc phòng và Bộ Ngoại giao
5- BCTC của một trung tâm y khoa tư nhân được lập phù hợp với các chuẩn mực
kế toán.
6- Quản đốc phân xưởng không thực hiện đúng trách nhiệm của mình như đã phân
công.
7- Chi cục thuế đã vi phạm việc thuê mướn nhân viên do nhà nước qui định
8- BCTC của một DN nhà nước cần kiểm toán để cổ phần hóa
9- BCTC của một UBND tỉnh trình bày đúng với thực tế thu và chi tiền
10- Dịch vụ thực hiện qua bưu điện cho một huyện ngoại thành là không hiệu quả
11- Công ty đã thực hiện đúng các điều khoản hợp đồng vay ngân hàng
12- Một bộ phận không thực hiện đúng các chính sách về làm thêm giờ do công ty
đề ra.
Yêu cầu:
a. Hãy chỉ ra loại kiểm toán nào đã tiến hành trong các loại kiểm toán sau: (1)
BCTC; (2) Tuân thủ; (3) Hoạt động
b. Xác định loại KTV thực hiện: (1) độc lập; (2) nội bộ; (3) nhà nước.
c. Xác định đối tượng chính để nhận báo cáo kiểm toán: (1) đối tác; (2) nhà quản lý;
(3) nhà nước... Sử dụng bảng dưới đây để trả lời cho các loại câu hỏi trên: Loại kiểm
toán, Loại KTV, Đối tượng nhận chính.
Ken's home has a replacement value of $200,000. Ken insured the home for $150,000 under an unendorsed Homeowners 3 policy. The roof of Ken's home was damaged by a windstorm. The replacement cost of the damaged roof is $16,000. The actual cash value of the loss is $12,000. How much will Ken receive from his insurer to settle this claim
Answer: $15,000
Explanation:
Using a Homeowners 3 policy, Ken will get the higher amount out of two amounts which are:
The actual cash value of the damaged area. An amount calculated as follows:= (Amount of Insurance cover on home / 80% of Replacement Cost) * Cost of Repair to damaged area.
The actual cash value is $12,000
The second amount is:
= (Amount of Insurance cover on home / 80% of Replacement Cost) * Cost of Repair to damaged area.
= 150,000 / (80% * 200,000) * 16,000
= 0.9375 * 16,000
= $15,000
Ken will receive the higher amount of $15,000.
An Engel curve:________.
A. slopes upward for normal goods and downward for inferior goods.
B. slopes upward for inferior goods and downward for normal goods.
C. slopes downward for both normal and inferior goods.
D. slopes upward for both normal and inferior goods.
Answer:
A. slopes upward for normal goods and downward for inferior goods.
Explanation:
In the case of Engle curve it plots the relationship between income and demand for a good.
In the case of the normal goods, as the income rises the demand also rises while on the other hand in the case of inferior goods, the income rises the demand false
So it sloped upward for the normal goods and slop downwards for the inferior goods
With the CEO and driver of the company—Howard Schultz—stepping down as the company’s unquestioned leader, do you expect Starbucks to change its foreign market entry strategy in any way?
Answer:
The short answer to that is No, Starbucks will not change its foreign market entry strategy.
Explanation:
The reasons are as follows:
did Howard Schultz lose his shares when he stepped down? This is highly unlikely and according to the rules of corporate governance may depend on his contract. So stepping down as the chairman does not necessarily translate to losing control. Corporations such as Starbucks: don't just up and change direction. Strategies are usually vetted by the board of directors. Whoever the majority shareholder is (corporate person or individual) will always have a say regarding the expansion of the business. Howard Schultz has stepped down in 2018. At that time, Starbucks had a total of 28,000 stores in 77 countries. Currently, there are 15,000 in 50 countries. This reduction didn't happen because Howard stepped down but because of the recent pandemic which hit the globe in 2020.Cheers
An investor, who had $75,000 to contribute, was choosing between a boutique and a local shoe shop. After careful deliberation, the investor chose the boutique. In the first year, the boutique generated enough profit to pay the investor $15,000 (an agreed percentage of profits to be paid to the investor). The investor found out that if he had invested in the local shoe shop he would have received $9,000 (an agreed percentage of profits to be paid to the investor).
The investor's economic profit was:________
Answer:
$6000
Explanation:
Economic profit = accounting profit - implicit cost
Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives
accounting profit = 15,000
Implicit cost = 9000
15,000 - 9000 = $6000