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gladu [14]
3 years ago
5

Joe decided to quit his computer-programming job (where he was earning $48,000 per year) to start his own software business. For

his office, Joe will use a two-story building that he bought 7 years ago for $250,000. The building is located in Hyde Park (South side of Chicago) in an area where a lot of recent construction has taken place, so the market price for the land has increased. You are given the following information about the costs of his firm:
Joe will pay himself a wage of: $18,000 per year
Maintenance and insurance $30,240 per year
Revenue $96,000 per year
Land’s salvage (resale) value $395,000
Risk-free interest rate 4.75% annually

Assume for simplicity that all taxes are equal to zero. Calculate the economic annual profits of this firm:_______

a. 47,760
b. −1,002.5
c. 47,741.2
d. 14,843.3
e. None of the above.
Business
1 answer:
Mrrafil [7]3 years ago
7 0

Answer:

b. −1,002.5

Explanation:

economic profit = accounting profit - opportunity costs

  • accounting profit = revenue - maintenance and insurance = $96,000 - $30,240 = $65,760
  • opportunity costs = the lost salary as a computer programmer + money he could earn by selling the land lot and investing = $48,000 + ($395,000 x 4.75%) = $66,762.50

economic annual profit = $65,760 - $66,762.50 = -$1,002.50

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Answer:

yes

Explanation:

7 0
2 years ago
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A firm is currently operating at full capacity. Net working capital, costs, and all assets vary directly with sales. The firm do
stich3 [128]

Answer: (C) Long term debt

Explanation:

  The long term debt is one of the type of long and fixed rate of interest and effectively balance the organizational liabilities and the cash flow process.

 The long term debt is the term which is used to refers to the higher quality of principle balance in which it is easy to manage the payments and the budget on the basis of the operational income.

 According to the given question, the long term debt is needed when the firm has the positive external financing factors and the main benefit of the long term debt that the investors are invested due to the interest payment and the fixed rate in the market.

Therefore, Option (C) is correct answer.    

3 0
3 years ago
If there were 70000 pounds of raw materials on hand on January 1, 100000 pounds are desired for inventory at January 31, and 250
vlabodo [156]

Answer:

280,000 pounds

Explanation:

The computation of the purchase of raw material is shown below:

= Ending inventory + production required - beginning inventory

= 100,000 pounds + 250,000 pounds - 70,000 pounds

= 280,000 pounds

We simply added the required production and deducted the beginning inventory to the ending inventory so that the correct pounds can be calculated

6 0
2 years ago
Depreciation by Three Methods; Partial Years
Daniel [21]

Answer:

a. Straight-line method.  

Year         Depreciation expense ($)

  1                           10,530

  2                          14,040

  3                          14,040

  4                            3,510

b. Units-of-production method.  

Year           Depreciation expense ($)

 1                               7,800

 2                             14,950

 3                             12,350

 4                              7,020

c. Double-declining balance method

Year   Depreciation expense ($)

  1                              21,735

 2                              14,490

 3                               4,830

 4                               1,065

Explanation:

(a) the straight-line method

Note: See part a of the attached excel file for the depreciation schedule for Straight-line method.

In the attached excel file, the depreciation rate used for the Straight-line method is calculated as follows:

Straight line depreciation rate = 1 / Estimated useful life = 1 / 3 = 0.3333, or 33.33%

(b) units-of-output method

Note: See part b of the attached excel file for the depreciation schedule for units-of-production method.

(c) the double-declining-balance method.

Note: See part c of the attached excel file for the depreciation schedule for double-declining-balance method.

In the attached excel file, the depreciation rate used for the Double- declining-balance method is calculated as follows:

Double-declining depreciation rate = Straight line depreciation rate * 2 = (1/3) * 2 = 0.666667, or 66.6667%

Note:

Under this double-declining-balance method, the depreciation expenses for Year 4 is calculated by deducting the residual value of $1,350 from the Year 4 Beginning depreciable amount (i.e. $2,415 - $1,350 = $1,065). The residual value of $1,350 therefore represents the book value at the end of Year 4.

Download xlsx
6 0
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Last year during the beginning of the Pandemic, name 5 household products people were hoarding?
professor190 [17]

Answer: Toiletry, Food, Cleaning items, Water

Explanation:

7 0
2 years ago
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