Antonio lives in San Diego and runs a business that sells boats. In an average year, he receives $731,000 from selling boats. Of
this sales revenue, he must pay the manufacturer a wholesale cost of $431,000; he also pays wages and utility bills totaling $259,000. He owns his showroom; if he chooses to rent it out, he will receive $8,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Antonio does not operate this boat business, he can work as an accountant, receive an annual salary of $30,000 with no additional monetary costs, and rent out his showroom at the $8,000 per year rate. No other costs are incurred in running this boat business.-------------------------Implicit Cost Explicit CostThe rental income Antonio could receive if he chose to rent out his showroom..................?The wages and utility bills that Antonio pays ...................?.The salary Antonio could earn if he worked as an accountant ..........................?The wholesale cost for the boats that Antonio pays the manufacturer....................?Complete the following table by determining Antonio's accounting and economic profit of his boat business.Profit(Dollars)Accounting Profit ...................?Economic Profit ........................?
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Answer:
Nominal annual rate of interest(r) = 2.5% (Approx)
Explanation:
Given:
Present value (P) = $1,200
Future value (F) = $1,618.62.
Number of year = 1year = 12 months
Find:
Nominal annual rate of interest(r)
Computation:
Nominal annual rate of interest(r) =
Nominal annual rate of interest(r) =
Nominal annual rate of interest(r) = 0.02525
Nominal annual rate of interest(r) = 2.5% (Approx)